La Estée Lauder Cos. has emerged as a surprise favorite to acquire Tom Ford International, according to industry sources.
While it’s far from a done deal, and banking sources have said there are still other actors in the photo, Clinique owner Bobbi Brown and Jo Malone are said to be in talks to acquire the luxury fashion brand.
As the Wall Street Journal first reported, the beauty behemoth has been in talks in recent weeks with Tom Ford, who has been actively looking for a buyer with the help of investment bank Goldman Sachs, and the number is said to on the table at about $ 3 billion, industry sources confirmed.
For now, both sides remain publicly silent, with a Lauder representative refusing to comment on the matter, while a spokesperson for Tom Ford did not respond to a request for comment. Goldman Sachs also didn’t answer a question.
Although such a deal would mark the cosmetics giant’s first foray into fashion, it has entered into a long-standing licensing partnership with Tom Ford Beauty and the so-called ultra-prestige brand has performed well, especially in the fragrance category.
At a recent Deutsche Bank conference in Paris, Tracey Thomas Travis, Lauder’s chief financial officer, said that “Tom Ford and Jo Malone are two of our largest midsize brands that are knocking on the door to cross the 1 mark. billion dollars to be big brands beyond the next two years ”.
He said that while much of Lauder’s M&A has focused on skincare and makeup, “the fragrance is also an M&A opportunity for us, given the success we’ve had with the change of strategy we’ve been running against. “.
And while there are questions about how Lauder will manage the ready-to-wear business, Lauder’s recent quarterly presentation for the three months ending March 31 detailed just how much Tom Ford is already a contributor on the beauty side.
It reported that net sales of fragrances increased in the three months, led mainly by Jo Malone London, Tom Ford Beauty, Le Labo and Estée Lauder, amounting to around $ 107 million, combined. Lauder’s total fragrance sales for the quarter were $ 579 million. The increase in Tom Ford Beauty “benefits from the continued success of the Private Blend and Signature fragrances and the third quarter 2022 product launches of Costa Azzurra parfum, Rose de Chine and Rose d’Amalfi,” the company said.
A banking source told WWD that such a move could be the start of its positioning in a luxury brand like LVMH Moët Hennessy Louis Vuitton and Kering.
Noting that most of the deal’s value would come from cosmetics and fragrances, with licensed eyewear, another financial source said: “I’m not at all surprised that Estée Lauder wants something like this.”
The source said sales of Tom Ford fragrances were set at around $ 275 million, but warned that even though the makeup and eyewear were that big, “$ 3 billion seems like a huge number for the valuation.”
It is relatively common for high purchase 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 agreement. However, if this price is realized, it will be Lauder’s largest acquisition to date, following the company’s agreement to pay $ 2.2 billion for a majority position in Deciem in 2021.
But, according to banking sources, there are also other interested players.
Recently, Kering, the owner of Gucci, said she was looking to break into the beauty segment during the first half results, though she didn’t specify whether she could follow in Hermès International’s footsteps by launching her own beauty lines, or whether was on the hunt for acquisitions.
“Beauty is definitely an area where we could contemplate some initiatives in the future and all options are open,” said group CEO Jean-François Palus.