Estée Lauder Cos. has emerged as a surprise front-runner to buy Tom Ford International, according to industry sources.
While it is far from a done deal, and banking sources said there are still other players in the picture, the owner of Clinique, Bobbi Brown and Jo Malone are said to be in talks to buy the luxury fashion brand.
As first reported by The Wall Street Journal, the beauty giant has been in negotiations in recent weeks with Tom Ford, who has been actively looking for a buyer with the help of the investment bank Goldman Sachs, and the number on the table has been said. to around $3 billion, industry sources confirmed.
For now, both parties are keeping quiet publicly, with a representative for Lauder 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 a request for comment.
While such a deal would mark the cosmetics giant’s first foray into fashion, it has had a long-standing licensing partnership with Tom Ford Beauty, and the so-called ultra-prestige brand has performed well, particularly in the fragrance category.
At a recent Deutsche Bank conference in Paris, Lauder’s CFO Tracey Thomas Travis said that “Tom Ford and Jo Malone are two of our biggest mid-market brands that are knocking on the door to be above the $1 billion mark to be big brands above the next couple year.”
She said that while much of Lauder’s M&A has been focused on skin care and makeup, “fragrance is an M&A opportunity for us as well given the success we’ve had with the shift in strategy that we’ve executed on.”
And while there are questions about how Lauder would handle the ready-to-wear business, Lauder’s latest quarterly report for the three months ended March 31 detailed just how much Tom Ford is already a contributor on the beauty side.
It reported that fragrance net sales increased over the three months, driven mainly by Jo Malone London, Tom Ford Beauty, Le Labo and Estée Lauder, coming in at about $107 million combined. Lauder’s total fragrance sales for the quarter totaled $579 million. The increase at Tom Ford Beauty “benefits from the continued success of Private Blend and Signature fragrances and the fiscal year 2022 third quarter product launches of Costa Azzurra perfume, Rose de Chine and Rose d’Amalfi,” the firm said.
A banking source told WWD that such a move could be the start of positioning itself as a luxury brand like LVMH Moët Hennessy Louis Vuitton and Kering.
Another financial source said most of the value in the deal would come from cosmetics and fragrance, with eyewear produced under license: “It doesn’t surprise me at all that Estée Lauder would want something like this.”
The source said Tom Ford fragrance sales were pegged at about $275 million, but cautioned that, even if makeup and eyewear were the same size, “$3 billion seems like a huge number for valuation.”
It is relatively common for hefty acquisition prices to be leaked to the press in the hope that some public exposure will help as negotiators work to establish the terms of the final deal. Still, if that price materializes, it would be Lauder’s biggest acquisition to date, following the company’s agreement to pay $2.2 billion for a majority stake in Deciem in 2021.
But according to banking sources, there are other players who are also interested.
Recently, Kering, the owner of Gucci, said it was looking at entering the beauty segment during its first-half results, although it did not specify whether it could follow in the footsteps of Hermès International by launching its own beauty lines, or whether looking for acquisitions.
“Beauty is definitely an area where we can consider some initiatives in the future and all options are open,” said CEO Jean-François Palus.