This is the largest acquisition in the history of Estee Lauder.
Until today, after more than four months of tug-of-war, dust to dust. The ownership of TF finally acquired by Estee Lauder.
From the beginning of July this year, there was news that Tom Ford was seeking a sale. As the operator of Tom Ford beauty line, Estee Lauder Company has also long held out an olive branch, while participating in the bid for the TF designer’s previous owner, Kering Group.
Just last week, according to the Wall Street Journal and many other foreign media reports, Estee Lauder will be $2.8 billion to buy the luxury brand Tom Ford. Just today, Estee Lauder’s official website announced that Estee Lauder and Tom Ford have signed an agreement for a deal that values the entire business at $2.8 billion. The amount paid by ELC for the acquisition is approximately $2.3 billion.
Everything is settled
According to Estee Lauder’s website, Estee Lauder and Tom Ford have signed an agreement in a deal that will establish longtime Tom Ford partner Estee Lauder as the sole owner of the Tom Ford brand and all of its intellectual property.
The deal values Tom Ford at approximately $2.8 billion. And after deducting the $250 million paid to Estée Lauder by eyewear maker Marcolin SpA at closing, Estée Lauder will pay $2.3 billion in the acquisition. The transaction is expected to be completed in the first half of 2023.
Under the agreement, Tom Ford, founder and CEO of Tom Ford, will continue to lead the creative direction of the brand after the deal closes until the end of 2023, Estée Lauder said, adding that Domenico De Sole, chairman of Tom Ford, will continue to serve as an advisor until the same time, while Marcolin SpA will continue to work with Tom Ford Marcolin SpA will continue to operate its eyewear business in partnership with Tom Ford and has been granted an exclusive perpetual license to the brand.
In addition, the deal will extend the long-term relationship between the Tom Ford and clothing brand Ermenegildo Zegna NV, including a long-term license for all men’s and women’s fashion as well as accessories and products. Estée Lauder and Ermenegildo Zegna NV will work closely together on creative direction to continue to strengthen the Tom Ford brand’s luxury positioning.
As a beauty brand that Estée Lauder has been operating, this strategic acquisition will also support Tom Ford Beauty in achieving higher levels of growth in key markets across the global luxury and online channels. In its fiscal year ending June 30, 2022, Tom Ford Beauty achieved nearly 25 percent growth in net sales, and Estée Lauder forecasts that Tom Ford Beauty will achieve annual net sales of $1 billion over the next several years.
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.”
(Credit: Tom Ford Official Website)
Estee Lauder needs Tom Ford
Estée Lauder Company needs Tom Ford more than Kering Group, because Tom Ford beauty has become a pillar brand of the Estée Lauder Group and a cash cow.
Take Estee Lauder Group’s latest financial report as an example, in the first quarter of fiscal year 2023 (July to September 2022), Estee Lauder Group’s total net sales were $3.93 billion, down 11% year-on-year, with organic sales down 5%. Its net profit also fell 29.33% year-on-year to $489 million .
However, Tom Ford fragrances achieved double-digit growth, with both new fragrances and classic fragrances performing outstandingly. Together with the boost from fragrance brands such as Le Labo and Jo Malone, net sales of the entire fragrance segment were $607 million, the same as the same period last year.
In the case of the group’s overall unsatisfactory performance, Tom Ford Beauty can still bring good performance growth to Estee Lauder Company, which also shows its important position within Estee Lauder Company. The continuous product pushing new products also shows that Estee Lauder Company has put a lot of effort into it. According to Estee Lauder’s website, this includes strong double-digit growth in compound annual net sales from 2012 to 2022. For Estee Lauder Company fiscal year ending June 30, 2022, Tom Ford Beauty achieved net sales growth of nearly 25 percent.
In addition, Tom Ford Beauty also performed very well in China, with a number of its products on the best-selling list.
According to the Tmall Double 11 list, Tom Ford ranked No. 4 in the fragrance industry and No. 14 in the color cosmetics industry. In the latest Tmall best-selling list, a number of products such as TF limited four-shade eyeshadow, TF classic lipstick, TF loose powder ranked in the top 5 in the segment list.
(Credit: Tom Ford Official)
What’s the purpose of acquisition?
According to Ariel OHANA, co-managing partner of OHANA & Co. in an interview with CHAILEEDO, there are two purposes for beauty companies to acquire brands. One is to expand the product category range of the company, and the other is to expand the local market share.
Before acquiring a series of high-end skincare, color cosmetics and toiletries brands, Unilever was almost absent in the high-end beauty market. For example, in June 2017, the acquisition of Hourglass, a high-end U.S. makeup brand, was Unilever’s first foray into color cosmetics. As the pace of acquisitions continued to move forward, Unilever’s sales for the full year 2018 began to rise and net profit rose 50.8% year-on-year .
Unilever’s Beauty & Personal Care division generated 0.9% sales growth in 2019 through new brands acquired. The acquisition included French drugstore Garancia, Japanese premium skincare Lenor Japan and Tatcha, a modern skincare brand rooted in the traditional Kyoto way of beauty. thus, Unilever’s acquisitions of beauty, skincare and toiletries brands have been quite effective in bringing growth to Unilever.
Another acquisition was the announcement by USHOPAL, a Chinese high-end beauty group, to acquire the British luxury care brand ARgENTUM, which was reportedly awarded the Positive Luxury certification by the global luxury industry together with very few other brands such as LV, Guerlain and La Mer, and together with ARgENTUM’s first “star product” – “la potion infinie” – has won a number of luxury beauty awards, including BAZAAR. The first “star product” of ARgENTUM – “la potion infinie”, has gained a group of loyal and faithful celebrity users, including Hollywood stars such as James Bond’s Daniel Craig, The Avengers’ Chris Hemsworth, Suicide Squad’s Margot Robbie, Batman’s Ben Affleck and others.
USHOPAL officials said. “Through this acquisition, USHOPAL’s experience in creating luxury beauty products, its accumulated technology and formula patents, global top ingredients, formula reserves and supply network will further improve USHOPAL Group’s high-end beauty branding, R&D and supply chain capabilities. This is an important step for USHOPAL to move beyond China to the world and grow into a ‘new luxury beauty group’.” USHOPAL’s acquisition of ARgENTUM shows that USHOPAL’s move may be aimed at expanding into international markets.
(Credit: from Website)
From the performance of the first three quarters of this year, Estee Lauder Company’s overall performance is still under pressure. Sanitary restriction and inflationary pressure still affect the beauty giant, which explains why the Estee Lauder Group is spending heavily on acquiring Tom Ford, partnering with Balmain Beauty, and adjusting its brand clusters. It needs a stable and energetic brand face to meet the challenges and expand its commercial footprint. Some industry insiders also said that this move by Estee Lauder Company, which has never been involved in businesses such as ready-to-wear and handbag accessories, may positioned itself as a luxury giant on par with the likes of LVMH and Kering Group.
(Source: Estee Lauder’s Official Website)
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