Prada buys rival Versace for $1.39 billion to create Italian fashion powerhouse

Italian fashion house Prada announced Thursday that it had reached a deal with US group Capri Holdings to buy Versace for 1.25 billion euros ($1.39 billion).

The acquisition will create a luxury group with revenues of over six billion euros that could better compete with industry giants such as the French conglomerates LVMH and Kering amid a slowdown in the sector worldwide.

"We are delighted to welcome Versace to the Prada Group and to build a new chapter for a brand with which we share a strong commitment to creativity, craftmanship and heritage," Prada group chairman and executive director Patrizio Bertelli said in a statement.

In 2018, Capri paid €1.83 billion (then $2.1 billion) to acquire Versace, which was previously owned 80 percent by the Versace family and 20 percent by the US investment fund BlackRock.

Amid declining sales, it put the Milan-based label up for sale, and began exclusive negotiations with Prada at the end of February.

Capri, which also owns Jimmy Choo and Michael Kors, had to accept a reduced price from Prada amid the market turmoil caused by US President Donald Trump's tariffs.

The Financial Times had reported that the price was initially expected to be about $1.6 billion but had been negotiated downwards in recent days.

Last month, Donatella Versace stepped down as creative director after more than 30 years, in what was widely seen as a prelude to the accord.

She took over in 1997 following the murder of her older brother Gianni, who founded the Milan-based label in 1978.

But on April 1 she was replaced as creative director by Dario Vitale, who has overseen soaring sales at Miu Miu, Prada's sister brand targeting a younger clientele.

Donatella Versace, who turns 70 in May, is now the label's chief brand ambassador.