Estée Lauder acquires the Tom Ford brand for $2.8 billion
The Estée Lauder Companies Inc. announced on November 15 that it has acquired the Tom Ford brand. As a long-time partner, the group becomes the sole owner of the brand and all its intellectual property, which includes cosmetics, fragrances, eyewear and fashion. While Tom Ford Beauty and Tom Ford eyewear would be highly profitable, fashion would not be as successful.
By Cristina D’Agostino16 novembre 2022
The takeover of the Tom Ford brand has been in the air for several weeks. On the ranks, major luxury players, including The Estée Lauder Companies (ELC) and the French group Kering, according to the Wall Street Journal. It is finally the American cosmetics group that gets its hands on a business that can potentially bring in important revenues, even if the various businesses of the Tom Ford brand are not all equally profitable, according to some experts. Another difficulty is that founder Tom Ford and his partner Domenico De Sole, co-founder and president of Tom Ford International, have never communicated any figures, which does not allow a clear understanding of the evolution of the global brand.
Today, according to the official ELC press release "The deal values the total enterprise at $2.8 billion. The amount to be paid by ELC for the acquisition is approximately $2.3 billion, net of a $250 million payment to ELC at closing from Marcolin S.p.A. (“Marcolin”). ELC expects to fund this transaction through a combination of cash, debt and $300 million in deferred payments to the sellers that become due beginning in July 2025."
Tom Ford fragrances and make-up products had already been licensed by the cosmetics group since 2007. In the fiscal year ending June 30, 2022, Tom Ford Beauty reported net sales growth of nearly 25% compared to 2021. The group hopes to reach $1 billion in net sales over the next two years. The acquisition will free the US group from royalty payments related to the Tom Ford Beauty licence fee.
The acquisition also includes the continued licensing of the Tom Ford eyewear business to Marcolin, which has been in business with the founder since the beginning of the Tom Ford brand 16 years ago. The same applies to the Tom Ford fashion license, which has been with the Ermenegildo Zegna Group since the beginning.
While the Tom Ford beauty, fragrance and eyewear business has always been shown to be very profitable, the same cannot be said for the fashion business, which is far less lucrative, according to our sources. Indeed, the great difficulty of the Tom Ford fashion brand has always been that of its distribution, oriented solely on an extremely expensive retail network and on a lack of visibility on potential customers. Another peculiarity was that the fashion business, managed by Domenico De Sole, and licensed to Ermenegildo Zegna, was separate from the beauty and eyewear business, which was much more profitable and directly linked to Tom Ford. The separate silo management of the two businesses has never allowed the Tom Ford fashion brand to benefit from the revenues of Tom Ford Beauty and Eyewear, to grow sufficiently.
It is therefore difficult to determine whether the $2.8 billion price tag is an appropriate price for the entire Tom Ford brand.
In its statement, Estée Lauder said that Tom Ford, founder and CEO of Tom Ford International, will remain the brand's creative visionary until the end of 2023, and that Domenico De Sole will remain a consultant until the end of 2023.
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