Estée Lauder nears $2.8bn deal to buy Tom Ford

Estée Lauder is nearing a deal to buy Tom Ford for about $2.8bn, including debt, beating out competition from a number of others interested in acquiring the luxury fashion brand, said people briefed about the matter.

Tom Ford has this week entered exclusive negotiations with Estée Lauder, which sells cosmetic brands such as MAC, Clinique and Aveda, and a deal could be announced as early as Monday, those people said.

A deal between the two brands would highlight the strength of a luxury fashion and cosmetics market which has continued to be resilient in the face of rising inflation and supply chain disruptions.

For New York-based Estée Lauder the acquisition of Tom Ford would be its biggest and latest in a series of transactions, including taking full control of Canadian beauty group Deciem for about $1bn in 2021.

Goldman Sachs was hired to explore a sale of Tom Ford earlier this year and has received interest from other luxury brands including Gucci owner Kering. Estée Lauder already has a longstanding licensing agreement for Tom Ford’s beauty and fragrance products, which could have complicated a deal with Kering. 

As part of the combination with Tom Ford, which was launched by the eponymous fashion designer in 2005, Estée Lauder would also acquire the apparel business, an area that it has relatively little experience in.

Tom Ford’s beauty line has done particularly well in China, a growth market for both groups. It has also a fairly lucrative eyewear business through licensing deals with sunglass manufacturer Marcolin.

The Wall Street Journal reported last week that Kering was in advanced discussions to buy Tom Ford for about $3bn, placing itself ahead of Estée Lauder. However, the talks with the owner Gucci fell apart as the two sides struggled to reach an agreement on a number of fronts, said people briefed about the matter.

Tom Ford is renowned for turning Gucci in the 1990s from a staid, family-owned leather business into a fashion powerhouse and the foundation for what is now Kering. He later left Gucci in 2005 to launch Tom Ford together with Domenico De Sole, who he had hired at Gucci in 1994. 

While Tom Ford has been successful, the business struggled during the coronavirus pandemic and the company was forced to lay off and furlough staff.