Estée Lauder has entered into an agreement to buy Tom Ford for $2.8 billion, adding a new line of beauty products and apparel to its portfolio.
The acquisition comes at a time when U.S. retailers are scaling back their stock of Estée Lauder products as consumers cut back on their discretionary spending. Estée Lauder is also dealing with a slowdown in business in China, prompting the company to lower its full-year forecast.
“Given the strength of Tom Ford Beauty, especially in EL’s most significant long-term growth market of China, we understand the appeal of the deal, but handling the fashion businesses leaves some questions,” Raymond James analyst Olivia Tong wrote in a November 14, 2022 note.
The deal is the latest in a series of acquisitions Estée Lauder has made recently. Last year, the company spent $1 billion on acquiring Ordinary skincare brand owner Deciem, Reuters reported.
Estée Lauder beat competing bids from other players, including Gucci’s parent company Kering. The beauty and cosmetics giant plans to fund the transaction through a combination of cash, debt, and $300 million in deferred payments to sellers beginning in July 2025.
Under Estée Lauder, Chief Executive Officer Tom Ford will continue to oversee his namesake brand’s creative vision.