Gucci owner Kering may have emerged as being in advanced talks to acquire Tom Ford International, but the deal is far from done and the Estée Lauder Cos. is not out of the picture.
The beauty giant is understood to still be in the running and preparing to submit a formal bid, sources told WWD, with the deadline said to be this week.
A spokeswoman for Lauder declined to comment, as did a representatives for Kering and Goldman Sachs. A spokesperson for Tom Ford did not immediately respond to request for comment.
While the macroeconomic environment and COVID-19 lockdowns weighed on Lauder’s performance in the first quarter of its financial year, executive vice president and chief financial officer Tracey Travis told WWD Wednesday that Lauder is “certainly mindful of a higher cost of capital,” but continues to be active in terms of looking for brands that would fit strategically within its portfolio.
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Lauder, the owner of Clinique, Bobbi Brown and Jo Malone, emerged as a potential suitor for Tom Ford in August. The brand had actively been searching for a buyer with the help of investment bank Goldman Sachs and at the time, the number on the table was said to be around $3 billion, according to industry sources.
Such a deal would mark the cosmetics giant’s first foray into fashion, but it has had a longtime licensing partnership with Tom Ford Beauty and the so-called ultra prestige brand has been performing well, especially in the fragrance category.
At a Deutsche Bank conference earlier this year in Paris, Travis said “Tom Ford and Jo Malone are two of our largest midsized brands that are knocking on the door of being over that $1 billion threshold to be large brands over the next couple of years.”
Lauder revealed Wednesday, however, in its first-quarter fiscal-year earnings that Tom Ford Beauty makeup was negatively impacted by the decline in retail traffic and travel due to the COVID-19-related restrictions, but on the positive side, Tom Ford Beauty fragrance net sales grew by strong double digits, powered by launches such as Noir Extreme Parfum and Ébène Fumé.
Since Lauder emerged as an interested party, it had been speculated that Kering, too, was interested. Kering said it was looking at entering the beauty segment during its first-half results, although it did not specify whether it might follow in the footsteps of Hermès International by launching its own beauty lines, or whether it 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 managing director Jean-François Palus.
Should Kering prevail in the bidding for Tom Ford, it would represent a return to the fold of sorts for the designer who, of course, formed his formidable reputation in building the Gucci brand into a powerhouse as well as designing the Saint Laurent label. But the split between the-then PPR, the predecessor to Kering, and Ford and his business partner Domenico De Sole was far from amicable at the time. Ford and de Sole went on to launch the Tom Ford label after splitting with PPR.
In a note, RBC analyst Piral Dadhania said: “We view this potential acquisition as a positive for Kering Group for a number of reasons, even if it is not transformative in size. Tom Ford is a well-recognized brand, with high-end positioning. It has a strong presence in fragrance, eyewear and to a lesser extent menswear in our view. From Kering’s perspective, we think it will feel it has complementary expertise to further develop the Tom Ford brand, particularly in womenswear and leather goods.”
The note added that “Kering could also potentially create value for Tom Ford’s fragrance business (currently under license with Estée Lauder) depending on whether it decides to create an internal Beauty platform (which is under review as it relates to Gucci’s Coty beauty license).”