U.S.-based global cosmetic giant Estée Lauder Companies (NYSE:EL) inked a deal to acquire the iconic luxury brand, TOM FORD, in a long-awaited deal worth $2.8 billion.
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Benefits of the Fashion Deal
Beating out Gucci owner Kering SA (GB:0IIH)(PPRUY) who was also seeking the TOM FORD brand, Estée Lauder will become the sole owner of the TOM FORD brand and all its intellectual property.
The addition of TOM FORD’s successful iconic brands as well as its talented team will accelerate growth for Estée Lauder in the luxury space.
Per the terms of the deal, Estée Lauder will pay approximately $2.3 billion, net of a $250 million payment to Estée Lauder at closing from TOM FORD’s existing partner, Marcolin S.p.A. Founder Tom Ford will retain his current position as creative director until 2023.
The deal is expected to be dilutive to EPS by $0.05-$0.15 in FY2023, due to one-time costs related to the acquisition. For FY2024, the deal is expected to have a neutral impact on earnings.
The acquisition, subject to certain approvals, is expected to close in the first half of 2023. Estée Lauder will fund the deal through cash and debt, as well as $300 million in deferred payments to the sellers that will be due in July 2025.
Is EL a Good Stock to Buy?
As per TipRanks, analysts are cautiously optimistic about Estée Lauder stock, with a Moderate Buy consensus rating based on 14 Buys and five Holds. The average EL stock price target of $249.11 implies 9.75% upside potential from the current levels.
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