Estée Lauder Cos. Said is considering acquiring Tom Ford – WWD

Estée Lauder Cos has emerged as the surprise first racer to take over Tom Ford International, according to industry sources.

Although it’s far from a done deal, and banking sources say there are still other players in the picture, owner Clinique, Bobbi Brown and Jo Malone are said to be in talks to acquire the luxury fashion label.

As the Wall Street Journal first reported, the beauty giant has been in negotiations over the past few weeks with Tom Ford, who has been actively looking for a buyer with the help of investment bank Goldman Sachs, and the figure on the table is said to be around $3 billion, industry sources confirmed.

For now, both parties are publicly silent, with a Lauder representative declining to comment on the matter, while a spokeswoman for Tom Ford did not respond to a request for comment. Goldman Sachs also did not respond to any inquiries.

While such a deal would mark the cosmetics giant’s first foray into the fashion world, its long-running licensing partnership with Tom Ford Beauty and the so-called premium brand has been doing well, particularly in the fragrance category.

At the recent Deutsche Bank conference in Paris, Lauder’s Chief Financial Officer, Tracy Thomas Travis, said “Tom Ford and Jo Malone are two of our biggest mid-size brands knocking on the door to cross the billion-dollar threshold to be big brands above the next two years.”

She said that while a lot of Lauder’s mergers and acquisitions focus on skincare and makeup, “fragrance is a M&A opportunity for us as well given the success we’ve had with the shift in strategy we implemented against it.”

And while there have been questions about how Lauder handles the ready-to-wear business, Lauder’s latest quarterly filing for the three months ending March 31 details how much Tom Ford really contributes to the beauty business.

It reported that perfume net sales increased over the three months, driven primarily by Jo Malone London, Tom Ford Beauty, Le Labo and Estee Lauder, and were about $107 million, combined. Lauder’s fragrance sales for the quarter totaled $579 million. The company said the increase in Tom Ford Beauty was “building on the continued success of Private Blend and Signature fragrances and the third-quarter fiscal year 2022 product launches of Costa Azzurra, Rose de Chine and Rose d’Amalfi.”

A banking source told WWD that such a move could be a start to position itself in luxury brands such as LVMH Moët Hennessy Louis Vuitton and Kering.

Noting that most of the value in the deal will come from cosmetics and perfumes, with the eyewear produced under license, another financial source said, “It doesn’t surprise me at all that Estée Lauder wants something like this.”

The source said sales of Tom Ford’s fragrances were estimated to be about $275 million, but cautioned that even if cosmetics and eyewear were big, “$3 billion seems like a huge number to appraise.”

It is relatively common for huge acquisition prices to leak to the press in the hope that a little public exposure will help while negotiators work out the terms of the final deal. However, if that price comes true, it will be the largest loader acquisition to date, after the company agreed to pay $2.2 billion to acquire majority position in Decim in 2021.

But, according to banking sources, other players are also interested.

Recently, Gucci’s owner Kering said she was looking to enter the beauty business during first-half results, though she didn’t specify whether it would follow in the footsteps of Hermès International by launching its own beauty lines, or whether it was looking for operations. Obsession.

“Beauty is certainly an area where we can consider some initiatives in the future and all options are open,” said Group Managing Director Jean-Francois Ballos.

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