Estée Lauder Agrees to Buy Tom Ford Brand

Tom Ford — designer, film director, art collector and fashion world provocateur — can now add one more accolade to his list: billionaire. On Tuesday, Estée Lauder announced it had agreed to buy his company for $2.3 billion.

The deal, which values the Tom Ford brand at $2.8 billion, is the largest in the luxury industry this year, and is a testament to the enduring power of perfume. It comes as high-end brands are looking for new avenues for growth as business in China — once the engine for luxury beauty businesses — has become more difficult amid pandemic restrictions.

Mr. Ford, 61, will stay on with the brand through the end of 2023, though his role beyond that is not yet clear.

The acquisition was driven by the strength of Tom Ford’s beauty business, which includes fragrance, cosmetics and skin care, and for which Estée Lauder has had a longstanding licensing agreement. The Tom Ford high-end scents, which include Black Orchid and Tuscan Leather, retail for more than $100 and routinely make the best-seller lists.

The deal also brings apparel to Estée Lauder, which had been strictly focused on beauty, with a portfolio of brands that include La Mer, Bobbi Brown and Clinique.

Estée Lauder reported this month that sales in Asia fell because of the region’s strict pandemic policies. Lower growth in China also forced Estée Lauder to reduce its financial forecast for next year. Shares of the company are down about 40 percent this year.

Perfumes have become a focus for Estée Lauder, particularly as the premium fragrance industry saw an unexpected bump during the pandemic, with shoppers seeking out small luxuries. Estée Lauder’s recent perfume acquisitions include the brands Frédéric Malle, Kilian and Le Labo. While hundreds of fragrances are released every year, a hit such as Chanel No. 5 or Mugler’s Angel can be the engine of a brand’s finances, thanks to the high profit margins associated with scent, whose appeal is not season specific.

“One of the surprise categories of growth for us during the pandemic was fragrance,” Tracey Thomas Travis, Estée Lauder’s chief financial officer, told analysts in June. “It represented a self-pampering opportunity for people.” Shoppers became more willing to buy fragrance online, Ms. Travis said, and such sales growth has continued even as life in North America and Western Europe has returned more to normal.

Other beauty companies, like Clarins and Procter & Gamble, have in the past acquired fashion businesses such as Mugler and Rochas to leverage their fragrances, but struggled with the challenges of the apparel industry. Estée Lauder, however, will license Tom Ford’s fashion to a third party: Zegna, the Italian group. Marcolin, which has held the license for Tom Ford eyewear since 2005, will continue to do so.

Zegna, with a license to produce and distribute Tom Ford men’s wear since 2006, will now become Estée Lauder’s sole licenser for Tom Ford men’s and women’s wear, with responsibilities for its stores and shows and for ensuring the brand remains a luxury product and continues to cast the sort of runway-associated halo that sells beauty products. Though a relatively small part of the brand’s portfolio, the brand’s fashion collections still receive outsize attention thanks to Mr. Ford’s name, reputation and celebrity connections. (He always dresses a host of boldface names on Oscar night.)

Adding Tom Ford will bring another frisson of cool to the Zegna group, which began expanding in 2018 with the acquisition of another buzzy independent American brand, Thom Browne.

Whether the Tom Ford business can stay as buzzy without Mr. Ford himself as the wizard behind the curtain is another question.

The famously stubbled Mr. Ford ultimately became as much a celebrity as the celebrities he dressed. He was transformed into a fashion star seemingly overnight in 1995 when, as the unknown designer at the helm of the moribund house of Gucci, he reinvented the brand with a fall/winter collection that included a healthy splash of sex mixed with just the right amount of irony and a dash of heritage.

Along with the then-chief executive Domenico De Sole, he made Gucci into the case study for brand turnarounds in both Milan and Paris, eventually attracting the attention of Bernard Arnault, who was busy building his group LVMH Moët Hennessy Louis Vuitton into a luxury behemoth.

Leery of ceding power to LVMH, Mr. Ford and Mr. De Sole appealed to a rival French tycoon, François Pinault of Pinault-Printemps-Redoute, who swooped in as their white knight, creating Gucci Group in a deal that would shape the modern luxury industry. Gucci Group eventually was absorbed into PPR, which became Kering — the owner of Gucci, YSL and Balenciaga, among other brands, and the main rival of LVMH.

Mr. Ford wasn’t part of it, however. In 2004, after a power struggle with PPR, he and Mr. De Sole left the company they had built. Starting the next year they introduced the eponymous fragrance Tom Ford, then an eyewear line, and then signed a deal with Zegna to produce Tom Ford men’s wear; Tom Ford women’s wear was introduced in 2010. Along the way, Mr. Ford also pursued a second career as a film director and writer, making a well-received debut in 2009 with “A Single Man.”

Though his fashion work may not have had the same impact as it had during his Gucci heyday, Mr. Ford never lost his sense for how to make a moment. In 2020, he had a show in Los Angeles to take advantage of the Oscar crowd; Jennifer Lopez, Miley Cyrus and Lil Nas X showed up.

In 2019, he became chairman of the Council of Fashion Designers of America, a role he stepped down from this year. It was one of many recent life changes, including turning 60 in 2021 and losing his partner of 35 years, the journalist Richard Buckley, who died in September 2021.

As much as any contemporary fashion figure, Mr. Ford helped shape the industry. It remains to be seen whether his decision to sell to a beauty behemoth rather than a major fashion group also sets a trend.