Estee Lauder Cos. agreed to buy Tom Ford for $2.8 billion in its biggest deal yet that also solidifies an existing licensing deal for the designer’s fragrances and makeup.
With the acquisition, Estee Lauder is ensuring that it maintains the valued association the company has had with Tom Ford’s fragrance and beauty lines for nearly two decades.
Estee Lauder will pay about $2.3 billion for the brand, financed with cash, debt and $300 million in deferred payments, while $250 million will come from Marcolin SpA, whose existing license with Tom Ford will be extended, according to a statement on Tuesday.
Tom Ford will extend its long-term license for men’s and women’s fashion, as well as accessories and underwear to current partner Ermenegildo Zegna NV for 20 years. The agreement also comes with an automatic 10-year renewal if the minimum performance conditions are met.
Zegna will acquire the fashion operations necessary to meet its obligations as a licensee with its available cash.
CREATIVE VISIONARY
Ford, the brand’s eponymous founder, will serve as “creative visionary” after the shutdown and until the end of 2023, while president Domenico De Sole will remain as a consultant until the same time, according to the statement.
Estee Lauder executives have said the existing licensing deal with Tom Ford generates nearly $1 billion in revenue for the company each year and that the current deal expires in 2030. At that point, the deal would have to be renegotiated, a risk that Estee Lauder avoids. with this deal.
The announcement follows a Bloomberg News report in July that Tom Ford was exploring a possible sale. Gucci owner Kering SA, which has long signaled it was interested in doing a transformative deal, has also held talks to acquire Tom Ford, people familiar with the matter said. A representative for Kering declined to comment.
Estee Lauder said it expects the transaction to dilute adjusted diluted earnings per share in its current fiscal year by 5 cents to 15 cents, primarily due to one-time acquisition-related costs. For its fiscal 2024 year, she expects the transaction to be roughly neutral to adjusted diluted earnings per share.
The acquisition is expected to close in the first half of 2023.
Perella Weinberg Partners advised Estee Lauder; Goldman Sachs Group Inc. advised Tom Ford while Zegna was advised by UBS Group AG.
Source: news.google.com