Estee Lauder Envies Tom Ford’s Fragrance. Does It Fancy Its Fashion?

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Attractiveness is in the eye of the beholder. The adage will really be the case if Estee Lauder Cos. acquires Tom Ford for $3 billion.

Whilst the cosmetics group might covet whole manage of Tom Ford’s beauty and fragrance arm, working with the company’s clothes and add-ons would be a great deal a lot more of a stretch.

The eponymous natural beauty, eyewear and clothing business, started by the previous Gucci artistic director in 2005, is working with Goldman Sachs Group Inc. to check out a prospective sale, Bloomberg Information noted last thirty day period. On Monday, Dow Jones reported that Estee Lauder was in talks to invest in the model. 

Estee Lauder already has a very long-standing licensing arrangement for Tom Ford’s large-stop magnificence and fragrance traces. The cosmetics big mentioned recently that Tom Ford and Jo Malone, which it also owns, were just about every near to bringing in $1 billion a 12 months in earnings. That may possibly clarify Estee’s intended interest — the enterprise is not commenting at this time — as it would not want to risk shedding that valuable licensing arrangement to a rival. 

But the Tom Ford business isn’t just about attractiveness. It also has an eyewear procedure, which is produced and distributed by Marcolin SpA. There is no rationale this arrangement couldn’t continue on underneath Estee Lauder’s stewardship. The trickier aspect would be Tom Ford’s garments and accessories. Estee isn’t a organic proprietor of a manner house, so it would likely will need to discover a luxury husband or wife with experience in clothing.

This most probable won’t be 1 of the bling behemoths this kind of as LVMH Moet Hennessy Louis Vuitton SE or Gucci-proprietor Kering SA. Why would they concur to make the clothes and add-ons with no the magnificence?

A smaller luxury group, this sort of as Ermenegildo Zegna Holditalia SpA or Diesel, would make extra perception. And Zegna presently has a business partnership with Tom Ford. Domenico De Sole, Gucci’s previous CEO who is now chairman of the Tom Ford model, also sits on the Zegna board.

So why does not Zegna acquire Tom Ford by itself? It would be a practical addition to its portfolio alongside the younger Thom Browne label, which it obtained four yrs ago. The sticking issue might be the price tag tag. While Zegna has a potent balance sheet soon after its listing in New York as a result of a particular purpose acquisition business last yr, its business value is about $3 billion, close to the selling price Estee Lauder is claimed to be taking into consideration spending for Tom Ford. 

By marketing itself as a attractiveness business, Tom Ford is wanting to faucet into some of the wealthy multiples paid for cosmetics and skincare labels in excess of the past 5 yrs. 

Meanwhile, any person generating Tom Ford’s streamlined suits or a single-shoulder mini-dresses would have their perform slice out. They’d have to continue to keep the brand at the high-end of the luxury hierarchy in buy to tempt far more people to get its dear lipsticks and fragrances. And even though Tom Ford’s toughness is in clothing, it does not have an in-need purse line, the serious revenue driver of the luxurious sector.

It is not crystal clear regardless of whether Ford himself would be element of the arrangement. Bloomberg News claimed that a deal may perhaps involve an solution to do the job with the founder just after the sale. That could possibly go away a private equity company, keen to get hold of the natural beauty company, as a likely purchaser. But with financing marketplaces seizing up, conditions may possibly be more challenging.

Estee Lauder would be as great an owner of Tom Ford as any, but it’ll have some complexities to iron out. The trick will be demonstrating that the splendor of this deal is much more than pores and skin deep.

This column does not essentially mirror the view of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Feeling columnist masking client merchandise and the retail marketplace. Formerly, she was a reporter for the Economic Instances.

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