It’s good to be king.
The Estée Lauder Companies Inc. (ELC) will acquire the Tom Ford brand — launched in 2005 — becoming the sole owner of the brand and all its intellectual property. 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. Under the stewardship of ELC, the purchase of Tom Ford and the extension of its current licensing partners will allow for continuity and the further evolution of the brand as one of the preeminent global luxury brands of the twenty-first century.
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. 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.
ELC will benefit from the transaction by securing the long-term cash flow of the fast-growing Tom Ford Beauty brand beyond its current license expiration in 2030, as well as 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 this transaction to be dilutive to adjusted diluted earnings per share (“EPS”) 1 in fiscal 2023 by ($0.05) to ($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.
The deal will extend and expand the Tom Ford brand’s longstanding 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 licensee. ELC and Zegna will align closely on the creative direction to continue building on the luxury positioning of the Tom Ford brand. The brand’s current license with leading global eyewear manufacturer Marcolin will also be substantially extended.
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.”
Domenico De Sole, co-founder and Chairman of Tom Ford International 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 honored that Tom Ford has been part of our ELC family for more than fifteen years, from our first collaboration with the Estée Lauder brand to the launch of Tom Ford BEAUTY and through its most recent successes,” said William P. Lauder, Executive Chairman, The Estée Lauder Companies. “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 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.”
In April 2007, Ford’s first directly owned flagship store opened in New York on Madison Avenue which coincided with the debut of the 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 such as: London, Milan, New York, Beverly Hills, Miami, Las Vegas, Tokyo, Osaka, Seoul, Montreal, Toronto, Hong Kong, Shanghai, Beijing, New Delhi, Xian, Doha, Kuwait City, Riyadh and Sydney.
It’s good to be king.