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Estée Lauder to Acquire Tom Ford Brand in $2.8 Billion Deal

November 17, 2022
November 17, 2022
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After much speculation, Estée Lauder has signed an agreement to acquire the Tom Ford brand in a transformational deal that will establish its longstanding partner as the sole owner of the brand and all its intellectual property.

WHO: In April 2005, Tom Ford announced the creation of the Tom Ford brand. Ford was joined in this venture by former Gucci Group President and Chief Executive Officer Domenico De Sole, who serves as Chairman of the company. In that same year, Ford announced his partnership with Marcolin Group to produce and distribute optical frames and sunglasses, as well as a partnership with Estée Lauder to create the Tom Ford Beauty brand.

In April 2007, Ford's first directly owned flagship store opened in New York on Madison Avenue, which coincided with the debut of Tom Ford menswear and accessory collections. In September 2010, during an intimate presentation at his Madison Avenue flagship, Ford presented his highly anticipated womenswear collection. In February 2018, Ford debuted Tom Ford timepieces and the much-anticipated underwear collection for the first time on the runway.

Today, the brand offers a complete collection of menswear, womenswear, accessories, eyewear, beauty and, most recently, underwear and timepieces. Presently there are over 100 freestanding Tom Ford stores and shop-in-shops in locations.

WHY: Estée Lauder benefits include securing the long-term cash flow from owning the fast-growing Tom Ford Beauty brand beyond the existing license expiration in 2030 and eliminating royalty payments on beauty upon closing, as well as new licensing revenue streams and other anticipated synergies. These synergies include creative oversight, increased speed and agility, and opportunities for further online penetration.

Estée Lauder edged out luxury conglomerate Kering in the deal, which was defensive in nature. If Kering or another company had taken over the brand, Estée Lauder ran the risk of losing the Tom Ford Beauty license and the substantial revenue attached.

IN THEIR OWN WORDS: We are incredibly proud of the success Tom Ford Beauty has achieved in luxury fragrance and makeup and its dedication to creating desirable, high-quality products for discerning consumers around the world," said Fabrizio Freda, President and Chief Executive Officer, The Estée Lauder Companies.

"As an owned brand, this strategic acquisition will unlock new opportunities and fortify our growth plans for Tom Ford Beauty. It will also further help to propel our momentum in the promising category of luxury beauty for the long-term, while reaffirming our commitment to being the leading pure player in global prestige beauty."

Tom Ford states, "I could not be happier with this acquisition as The Estée Lauder Companies is the ideal home for the brand. They have been an extraordinary partner from the first day of my creation of the company and I am thrilled to see them become the luxury stewards in this next chapter of the Tom Ford brand. Ermenegildo Zegna and Marcolin have been spectacular long-standing partners as well and I am happy to see the preservation of the great relationship that we have built over the past 16 years. With their full commitment, I trust they will continue the brand's future as a luxury company that strives to produce only the highest quality fashion and eyewear."

"We are committed to driving the continued success of Tom Ford Beauty, and this exciting acquisition strategically positions us for future growth," said Guillaume Jesel, President, Luxury Business Development, The Estée Lauder Companies. "Tom Ford is a true visionary and the ultimate architect of luxury. Together with the legendary Domenico De Sole, they have created a remarkable new world of luxury. It is an honor to continue to lead the brand and the exceptionally talented team, and manifest Tom Ford's extraordinary vision of luxury beauty and beyond."

"We have been partners and shareholders of the Tom Ford fashion business since its inception. This transaction is the first since our listing in December 2021, and confirms our commitment to leverage our platform to create value for all of our stakeholders," said Ermenegildo "Gildo" Zegna, CEO of Ermenegildo Zegna Group. "We have been so inspired by the incredible talent at Tom Ford and are delighted to embark on this powerful and enriching relationship with The Estée Lauder Companies."

DETAILS:

  • The deal values the total enterprise at $2.8 billion. The amount to be paid by Estée Lauder for the acquisition is approximately $2.3 billion, net of a $250 million payment to Estée Lauder at closing from Marcolin S.p.A. 
  • Estée Lauder 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 Beauty has delivered impressive success, including growing strong double-digit net sales on a compound annual basis from fiscal years 2012 through 2022. In Estée Lauder's fiscal year ended June 30, 2022, the brand achieved nearly 25% net sales growth as compared to the prior year, and over the next couple of years, it is expected to reach annual net sales of one billion dollars. The brand continues to have strong momentum across channels and key markets, resulting in a prestige fragrance ranking in the top 15 in the United States and top 10 in China. 
  • Under the agreement, Tom Ford, founder, and CEO of Tom Ford International, will continue to serve as the brand's creative visionary after closing and through the end of calendar 2023. Domenico De Sole, Chairman of Tom Ford International, will stay on as a consultant until that same time.
  • The deal will extend and expand the Tom Ford brand's long-standing relationship with Ermenegildo Zegna N.V. to include a long-term license for all men's and women's fashion as well as accessories and underwear. As part of this transaction, Zegna will acquire operations of the Tom Ford fashion business necessary to perform its obligations as a licensee. Estée Lauder and Zegna will align closely on the creative direction to continue building on the luxury positioning of the brand.
  • The brand's current license with Marcolin, one of the leading global eyewear manufacturers, known for its superior craftsmanship and quality, will also be substantially extended.
  • In this transaction, Perella Weinberg Partners LP served as financial advisor to The Estée Lauder Companies Inc., and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel. Goldman Sachs & Co. LLC served as sole financial advisor to Tom Ford and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel. Zegna received financial advice from UBS. Latham & Watkins LLC served as legal counsel to Marcolin.
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