Wall Street has digested the news that the Estée Lauder Cos. is acquiring the Tom Ford brand and investors appear to be taking it in stride.
In after-market trading, Lauder’s shares fell marginally, but on Wednesday, investors appeared to be relatively unphased by the company’s largest acquisition to date — shares dipped slightly, by 1.8 percent, to close at $222.91.
Of the deal, Olivia Tong, an analyst at Raymond James, said: “This is EL’s largest deal to date, with now full control of a fast-growth brand pivotal to what we expect will be EL’s eventual recovery in China and travel retail. Importantly, we expect minimal transition disruption in the non-beauty portions of Tom Ford, as Marcolin continues as the brand’s eyewear license partner and fashion brand Ermenegildo Zegna will continue as the brand’s fashion, accessories [and] underwear partner.
“Unlike prior M&A transactions, [Estée Lauder] already operates [Tom Ford] beauty business, allowing for a seamless transition, giving EL the ability to unlock the brand’s full profitability potential, and increasing exposure to the attractive lux beauty market. As expected, TF fashion and eyewear will be outsourced,” said Ashley Helgans, an analyst at Jefferies.
Under the agreement, Tom Ford, founder and chief executive officer of Tom Ford, 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 through that period, too., Luca Solca, senior research analyst of global luxury goods at Bernstein, said it was a good deal. “It allows it to consolidate the license and to further develop after the acquisition of Tom Ford.
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