Estee Lauder has agreed to buy US fashion label Tom Ford for $2.8 billion, its biggest deal yet, adding a line of beauty products and clothing to the Clinique brand owner's portfolio.
Luxury companies have so far enjoyed steady demand for their products, but cracks are starting to show as decades-high inflation forces some customers to tighten their purses.
Estee said this month that US retailers were cutting stocks of its products amid worries of a demand slowdown and lowered its full-year forecasts , hurt by lockdowns in China.
While Estee Lauder already sells Tom Ford beauty products and fragrances, the deal has raised some eyebrows on Wall Street.
The deal is the latest in a series of acquisitions by Estee Lauder, including taking control of Ordinary skincare brand owner Deciem last year for about $1 billion.
As of last night's close, Estee's stock fell 17% since the deal talks with Tom Ford were reported by the media in August.
Tom Ford had entered into exclusive negotiations with Estee Lauder last week, beating competing bids from companies including Gucci owner Kering, the Financial Times reported on Friday.
Estee expects to fund the transaction through a combination of cash, debt and $300m in deferred payments to sellers that become due beginning in July 2025, the company said.
Chief executive Tom Ford will continue to serve as the brand's creative visionary.
