In big breaking news The Estée Lauder Companies (ELC) announced today (15 November) that it has signed an agreement to acquire the Tom Ford brand, which it described as a global leader in luxury.
The “transformational” deal will establish ELC, a long-standing beauty sector partner of Tom Ford as the sole owner of both the brand and all its intellectual property.
ELC said: “Under the stewardship of ELC, the purchase of the Tom Ford brand and the extension of its current licensing partners will allow for continuity and the further evolution of the Tom Ford brand as one of the preeminent global luxury brands of the twenty-first century.”
Marcolin and Zegna licensing deals in eyewear and fashion extended
The deal values the total enterprise at US$2.8 billion. ELC will pay some US$2.3 billion for the acquisition, net of a US$250 million payment to ELC at closing from eyewear manufacturer Marcolin. Tom Ford’s current license with Marcolin will also be substantially extended. ELC expects to fund this transaction through a combination of cash, debt and US$300 million in deferred payments to the sellers that become due beginning in July 2025.
The deal will also extend and expand the Tom Ford brand’s long-standing relationship with Ermenegildo Zegna to include a long-term license for all men’s and women’s fashion as well as accessories and underwear.
A billion dollar beauty propositionTom Ford Beauty was first introduced by ELC in 2006. In the intervening years it has become a hugely successful beauty brand, growing strong double-digit net sales on a compound annual basis from fiscal years 2012 through 2022. In ELC’s fiscal year ended 30 June, 2022, Tom Ford Beauty achieved nearly +25% net sales growth year-on-year. ELC said it expected the brand to achieve annual net sales of US$1 billion over the next two years. Tom Ford Beauty continues to have strong momentum across channels and key markets resulting in a prestige fragrance ranking in the top 15 in the US and top ten in China. Tom Ford Beauty offers what ELC described as a highly differentiated collection of fragrance, makeup, and skin care, which the group said reflects Tom Ford’s singular vision of modern glamour, crafted with ultimate quality. ELC said the brand is strongly positioned in the luxury fragrance and makeup categories, areas that are expected to outperform industry growth over the coming years in key markets for luxury and online channels globally. |
As part of this transaction, Zegna will acquire operations of the Tom Ford fashion business necessary to perform its obligations as licensee. ELC and Zegna will align closely on the creative direction to continue building on the luxury positioning of the Tom Ford brand.
“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 The Estée Lauder Companies President and Chief Executive Officer Fabrizio Freda.
“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.”
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. Tom Ford International Chairman Domenico De Sole will stay on as a consultant until that same time.
ELC’s 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 the elimination of 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. ELC expects the transaction to be dilutive to adjusted diluted earnings per share (EPS) in fiscal 2023 by (US$0.05) to (US$0.15), primarily from one time acquisition-related costs.
For fiscal 2024, the transaction is anticipated to be roughly neutral to adjusted diluted EPS. The acquisition is subject to certain conditions, including regulatory approvals, and is expected to close in the first half of calendar 2023.
Tom Ford said, “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.”
Tom Ford International Co-founder and Chairman Domenico De Sole said, “I am delighted with this acquisition. I view The Estée Lauder Companies, the first partner in our Tom Ford journey, as the trusted party to continue the extraordinary legacy of the Tom Ford brand. I thank Tom for his magnificent vision and leadership, and our amazingly talented Tom Ford team for their hard work and commitment to the brand.”
“We are honoured that Tom Ford has been part of our ELC family for more than 15 years, from our first collaboration with the Estée Lauder brand to the launch of Tom Ford Beauty and through its most recent successes,” said The Estée Lauder Companies Executive Chairman William P. Lauder.
“ELC and Tom Ford share a deep appreciation for luxury, creativity, entrepreneurial spirit, and a commitment to excellence, and above all, the extraordinary talent that fuels our businesses.”
“We are committed to driving the continued success of Tom Ford Beauty, and this exciting acquisition strategically positions us for future growth,” said The Estée Lauder Companies President, Luxury Business Development Guillaume Jesel.
“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 honour 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,” said Ermenegildo Zegna Group CEO Ermenegildo ‘Gildo’ Zegna. “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.
“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.”
“It has been an incredible journey over the last two decades to establish the Tom Ford eyewear business among the global leaders of unparalleled quality and style,” said Marcolin Chief Executive Officer Fabrizio Curci.
“We are thrilled to work with The Estée Lauder Companies with our exclusive and perpetual license for the brand, which will allow us to further support the growth of this amazing brand.”
“Tom Ford, Domenico De Sole and their best-in-class team have established one of the world’s most innovative global luxury brands and we are excited to build its vibrant future,” Freda added. “Zegna and Marcolin are the ideal long-term licensees for Tom Ford fashion and eyewear. We are thrilled to have the continuity they bring to the brand and their steadfast dedication to quality, luxury and craftsmanship will help us to carry this brand into the future.”
