Transaction values Tom Ford at $2.8 billion

Ermenegildo Zegna Group and Marcolin S.p.A. enter long-term license agreements for TOM FORD fashion and TOM FORD eyewear, respectively

Under the stewardship of ELC, the purchase of the TOM FORD brand and the extension of its current licensing partners will allow for continuity and the further evolution of the TOM FORD brand as one of the preeminent global luxury brands of the twenty-first century.

The deal values the total enterprise at $2.8 billion. The amount to be paid by ELC for the acquisition is approximately $2.3 billion, net of a $250 million payment to ELC at closing from Marcolin S.p.A. (“Marcolin”). ELC expects to fund this transaction through a combination of cash, debt and $300 million in deferred payments to the sellers that become due beginning in July 2025.

ELC’s benefits include securing the long-term cash flow from owning the fast-growing TOM FORD BEAUTY brand beyond the existing license expiration in 2030 and the elimination of royalty payments on beauty upon closing, as well as new licensing revenue streams and other anticipated synergies. These synergies include creative oversight, increased speed and agility, and opportunities for further online penetration. ELC expects this transaction to be dilutive to adjusted diluted earnings per share (“EPS”) 1 in fiscal 2023 by ($0.05) to ($0.15), primarily from one time acquisition-related costs. For fiscal 2024, the transaction is anticipated to be roughly neutral to adjusted diluted EPS. The acquisition is subject to certain conditions, including regulatory approvals, and is expected to close in the first half of calendar 2023.

Under the agreement, Tom Ford, Founder and CEO of Tom Ford International, will continue to serve as the brand’s creative visionary after closing and through the end of calendar 2023. Domenico De Sole, Chairman of Tom Ford International, will stay on as a consultant until that same time.

The deal will extend and expand the TOM FORD brand’s longstanding relationship with Ermenegildo Zegna N.V. (NYSE: ZGN) (“Zegna”, or “Zegna Group”) to include a long-term license for all men’s and women’s fashion as well as accessories and underwear. As part of this transaction, Zegna will acquire operations of the TOM FORD fashion business necessary to perform its obligations as licensee. ELC and Zegna will align closely on the creative direction to continue building on the luxury positioning of the TOM FORD brand.

The brand’s current license with Marcolin, one of the leading global eyewear manufacturers, known for its superior craftsmanship and quality will also be substantially extended.

TOM FORD BEAUTY, first introduced by ELC in 2006, is an iconic luxury beauty brand with a highly differentiated collection of fragrance, makeup, and skin care that reflects Tom Ford’s singular vision of modern glamour, crafted with ultimate quality. Established with an initial luxury fragrance, TOM FORD BEAUTY has since grown into one of the most successful and aspirational beauty brands in the world.

“We are incredibly proud of the success TOM FORD BEAUTY has achieved in luxury fragrance and makeup and its dedication to creating desirable, high-quality products for discerning consumers around the world,” said Fabrizio Freda, President and Chief Executive Officer, The Estée Lauder Companies.

“As an owned brand, this strategic acquisition will unlock new opportunities and fortify our growth plans for TOM FORD BEAUTY. It will also further help to propel our momentum in the promising category of luxury beauty for the long-term, while reaffirming our commitment to being the leading pure player in global prestige beauty.”

TOM FORD BEAUTY is strongly positioned in the luxury fragrance and makeup categories, areas that are expected to outperform industry growth over the coming years. This strategic acquisition supports the next level of growth for TOM FORD BEAUTY in key markets for luxury and online channels globally. The brand has delivered impressive success, including growing strong double-digit net sales on a compound annual basis from fiscal years 2012 through 2022. In ELC’s fiscal year ended June 30, 2022, TOM FORD BEAUTY achieved nearly 25% net sales growth as compared to the prior year, and over the next couple of years, we expect that the brand will achieve annual net sales of one billion dollars. The brand continues to have strong momentum across channels and key markets resulting in a prestige fragrance ranking in the top 15 in the United States and top 10 in China. The brand has received over twenty awards from The Fragrance Foundation.

Tom Ford states, “I could not be happier with this acquisition as The Estée Lauder Companies is the ideal home for the brand. They have been an extraordinary partner from the first day of my creation of the company and I am thrilled to see them become the luxury stewards in this next chapter of the TOM FORD brand. Ermenegildo Zegna and Marcolin have been spectacular long-standing partners as well and I am happy to see the preservation of the great relationship that we have built over the past 16 years. With their full commitment, I trust they will continue the brand’s future as a luxury company that strives to produce only the highest quality fashion and eyewear.”