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Andrea Felsted
Only three months after it emerged that Estee Lauder Cos. was in talks to buy Tom Ford for $3 billion, it’s now being reported that Gucci-owner Kering SA is in advanced discussions to acquire the American designer’s eponymous brand.
Kering’s challenge with the label, known for its pricey fragrances and mini-dresses, would be almost the inverse of Estee Lauder’s. While Estee has buckets of beauty know-how, it lacks credibility in fashion. In contrast, Kering, which declined to comment on Friday, is a master of high-end clothing and accessories but would need to take control of the cosmetics arm to make the acquisition work.
Tom Ford’s top-end apparel line would certainly be a good fit with Kering’s portfolio, which is led by Gucci but also includes Saint Laurent, Bottega Veneta and Balenciaga.
Kering has the “magic touch†with fashion, luxury adviser Mario Ortelli told me, with the ability to inject and sustain the right creative vision, alongside impeccable marketing, distribution and merchandising.
Tom Ford, estimated by UBS to have sales of €1.5 billion in 2021, is strongest in menswear and Kering could use its Brioni brand to supply some of the Tom Ford garments currently produced by Ermenegildo Zegna NV. The French conglomerate could also draw on its expertise in fashion to develop Tom Ford’s womenswear, footwear and leather goods. The latter are the real profit drivers of the industry.
Plus, the two houses have a history. The designer Tom Ford was behind Gucci’s first reinvention in the 1990s. And Kering is currently attempting a third revamp of the close to €10 billion revenue brand, while keeping it under the direction of designer Alessandro Michele. Analysts at Jefferies point out that if Ford could collaborate with Michele, this could ignite interest in Gucci once more. Michele’s granny chic with Tom Ford’s sexy silhouettes, anyone?
Kering also has a strong balance sheet, with Bloomberg Intelligence estimating a net cash position in the year ahead, so it could easily afford the mooted $3 billion price tag.
But to get the best value from the deal, Kering must take control of Tom Ford’s lucrative beauty license, which is currently with Estee Lauder. That won’t be cheap or easy.
Kering has made no secret of its desire to develop Gucci’s beauty business, which is currently licensed to Coty Inc. It has set up an internal team to evaluate its options in the sector. If Tom Ford were a stepping stone to building critical mass in cosmetics and fragrance, then the complexities and expense of acquiring the license would be worth it.
—Bloomberg