Estee Lauder Envies Tom Ford’s Perfume. Does It Fancy Its Trend?


Magnificence is within the eye of the beholder. The adage will actually be the case if Estee Lauder Cos. acquires Tom Ford for $three billion.

Whereas the cosmetics group could covet full management of Tom Ford’s magnificence and perfume arm, coping with the corporate’s clothes and accessories can be much more sophisticated.

The namesake magnificence, eyewear and attire firm, based by Gucci’s former chief inventive officer in 2005, is working with Goldman Sachs Group Inc. to discover a potential sale, Bloomberg Information reported final month. On Monday, Dow Jones reported that Estee Lauder was in talks to purchase the model.

Estee Lauder already has a long-standing licensing settlement for Tom Ford’s high-end magnificence and perfume strains. The cosmetics big just lately mentioned that Tom Ford and Jo Malone, which he additionally owns, had been every near producing $1 billion a yr in income. Which will clarify Estee’s alleged curiosity, the corporate is not commenting in the mean time, because it would not wish to danger dropping that profitable licensing deal to a rival.

However Tom Ford’s enterprise is not all about magnificence. He additionally has an eyewear operation, which is produced and distributed by Marcolin SpA. There isn’t a motive why this deal can’t proceed underneath the course of Estee Lauder. Essentially the most sophisticated half can be Tom Ford’s clothes and accessories. Estee will not be a pure proprietor of a style home, so she in all probability must discover a luxurious companion with clothes experience.

Likelihood is it will not be one of many bling giants like LVMH Moet Hennessy Louis Vuitton SE or Gucci proprietor Kering SA. Why would they comply with produce the garments and equipment with out the sweetness?

A smaller luxurious group, comparable to Ermenegildo Zegna Holditalia SpA or Diesel, would make extra sense. And Zegna already has a enterprise relationship with Tom Ford. Domenico De Sole, former CEO of Gucci and now president of the Tom Ford model, can be on Zegna’s board.

So why would not Zegna purchase Tom Ford? It could be a helpful addition to his portfolio together with the youthful Thom Browne label, which he acquired 4 years in the past. The sticking level stands out as the price ticket. Though Zegna has a robust steadiness sheet after its New York itemizing through a particular function acquisition firm final yr, its enterprise worth is roughly $three billion, roughly the worth Estee Lauder can be contemplating paying for Tom Ford. .

By advertising itself as a magnificence enterprise, Tom Ford is trying to faucet into a few of the wealthy multiples paid by cosmetics and skincare labels over the previous 5 years.

In the meantime, anybody producing Tom Ford’s streamlined fits or one-shoulder minidresses would have their work minimize out for them. They must preserve the model on the prime finish of the posh hierarchy to entice extra shoppers to purchase their costly lipsticks and fragrances. And whereas Tom Ford’s energy is in clothes, he would not have an in-demand line of purses, the actual revenue engine of the posh business.

It is unclear whether or not Ford himself can be a part of the deal. Bloomberg Information reported that a deal could embrace an choice to work with the founder after the sale. That would depart a non-public fairness agency, thinking about taking up the sweetness enterprise, as a possible purchaser. However with monetary markets paralyzed, circumstances could also be harder.

Estee Lauder would make pretty much as good a Tom Ford proprietor as anybody, however she’ll have some complexities to work out. The trick might be to indicate that the fantastic thing about this deal is greater than pores and skin deep.

This column doesn’t essentially mirror the opinion of the editorial board or of Bloomberg LP and its house owners.

Andrea Felsted is a columnist for Bloomberg Opinion masking client items and the retail business. Beforehand, she was a reporter for the Monetary Instances.

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