Estee Lauder envies Tom Ford’s fragrance. Do you fancy his fashion? | Fashion

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

While the cosmetics group may covet full control of Tom Ford’s beauty and fragrance arm, dealing with the company’s clothing and accessories would be far more complicated.

The namesake beauty, eyewear and apparel company, founded by Gucci’s former creative director in 2005, is working with Goldman Sachs Group Inc. to explore a possible sale, Bloomberg News reported last month. On Monday, Dow Jones reported that Estee Lauder was in talks to buy the brand.

Estee Lauder already has a long-standing licensing agreement for Tom Ford’s high-end beauty and fragrance lines. The cosmetics giant recently said that Tom Ford and Jo Malone, which he also owns, were each close to generating $1 billion a year in revenue. That may explain Estee’s alleged interest, the company isn’t commenting at the moment, as it wouldn’t want to risk losing that lucrative licensing deal to a rival.

But Tom Ford’s business isn’t all about beauty. He also has an eyewear operation, which is produced and distributed by Marcolin SpA. There is no reason why this deal cannot continue under the direction of Estee Lauder. The most complicated part would be Tom Ford’s clothing and accessories. Estee is not a natural owner of a fashion house, so she probably needs to find a luxury partner with clothing expertise.

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Chances are it won’t be one of the bling giants like LVMH Moet Hennessy Louis Vuitton SE or Gucci owner Kering SA. Why would they agree to produce the clothes and accessories without the beauty?

A smaller luxury group, such as Ermenegildo Zegna Holditalia SpA or Diesel, would make more sense. And Zegna already has a business relationship with Tom Ford. Domenico De Sole, former CEO of Gucci and now president of the Tom Ford brand, is also on Zegna’s board.

So why doesn’t Zegna buy Tom Ford? It would be a useful addition to his portfolio along with the younger Thom Browne label, which he acquired four years ago. The sticking point may be the price tag. Although Zegna has a strong balance sheet after its New York listing through a special purpose acquisition company last year, its enterprise value is roughly $3 billion, roughly the price Estee Lauder would be considering paying for Tom Ford. .

By marketing itself as a beauty business, Tom Ford is looking to tap into some of the rich multiples paid by cosmetics and skincare labels over the last five years.

Meanwhile, anyone producing Tom Ford’s streamlined suits or one-shoulder minidresses would have their work cut out for them. They would have to keep the brand at the top end of the luxury hierarchy to entice more consumers to buy their expensive lipsticks and fragrances. And while Tom Ford’s strength is in clothing, he doesn’t have an in-demand line of handbags, the real profit engine of the luxury industry.

It’s unclear whether Ford himself would be part of the deal. Bloomberg News reported that a deal may include an option to work with the founder after the sale. That could leave a private equity firm, interested in taking over the beauty business, as a potential buyer. But with financial markets paralyzed, conditions may be more difficult.

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Estee Lauder would make as good a Tom Ford owner as anyone, but she’ll have some complexities to work out. The trick will be to show that the beauty of this deal is more than skin deep.

This column does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.

Andrea Felsted is a columnist for Bloomberg Opinion covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.

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