Estee Lauder close to acquiring Tom Ford for $2.8bn

The deal will be the biggest in the luxury fashion and cosmetics industry

Estee Lauder already has a licensing agreement for Tom Ford’s beauty and fragrance products. Reuters

Cosmetics company Estee Lauder is closing in on a deal to buy luxury brand Tom Ford for about $2.8 billion, including debt, Financial Times said, quoting sources.

The luxury brand, founded by fashion designer Tom Ford, entered into exclusive negotiations with Estee Lauder, which sells cosmetic brands such as Mac, Clinique and Aveda, this week and a deal could be announced as early as Monday, according to the FT report.

New York-based Estee Lauder beat out competition from others interested in acquiring Tom Ford.

The acquisition would be Estee Lauder’s biggest and latest in a series of transactions, including taking full control of Canadian beauty group Deciem for about $1bn in 2021.

If the deal goes through at the reported value, it will be the biggest in the luxury fashion and cosmetics industry.

In 2018, Capri Holdings bought Italian luxury fashion brand Versace for $2.12bn. In 2020, VF Corporation — which owns the Vans, Timberland, Altra and The North Face brands — bought streetwear company Supreme for $2.1bn.

Tom Ford is known for its menswear, but also counts women’s apparel, handbags, cosmetics and perfumes as part of its product line.

On the other hand, the move could help the Mac lipstick maker strengthen its luxury business that already houses high-end fragrances and skincare products.

US luxury and beauty products companies like Ralph Lauren and Estee Lauder have shrugged off the impact of inflation as wealthier shoppers continue to splurge on high-end clothing and footwear.

Estee Lauder already has a licensing agreement for Tom Ford’s beauty and fragrance products. As part of the deal with Tom Ford, Estee Lauder would also acquire the apparel business.

Tom Ford’s beauty line has done particularly well in China, a growth market for both groups, FT said.

It has also a lucrative eyewear business through licensing deals with sunglass manufacturer Marcolin.

Gucci owner Kering was in advanced discussions to buy Tom Ford for about $3bn, the Wall Street Journal reported last week.

However, talks with the Gucci owner fell apart as the two sides struggled to reach an agreement, FT reported, citing sources.

Bahrain-based alternative asset manager Investcorp bought about 50 per cent of Gucci in 1988 and 1989 and then bought the remaining 50 per cent in the company from Maurizio Gucci, grandson of the founder Guccio Gucci, in 1993.

Tom Ford, who is from Austin, Texas, was creative director of Gucci. With the backing of Investcorp he reinvented the Florentine luxury brand before going off on his own in 2005.

His company started off making men’s clothing and then grew to sell eyewear, beauty and fragrances licensed to Estee Lauder, as well as other accessories that include watches and leather goods.

In July this year, Bloomberg said Ford was working with investment bank Goldman Sachs on the sale, according to people with knowledge of the matter.