Prada has been able to buck the slowdown that has plagued much of the luxury industry recently

Two of the most well-known Italian fashion brands are officially joining forces.

Prada has agreed to buy Versace from Capri Holdings for US$1.375 billion, CNN reported earlier this month. That’s slightly less than the US$1.6 billion price tag that had been reported last month, but it’s still a massive shake-up in the world of luxury fashion.

“We aim to continue Versace’s legacy celebrating and re-interpreting its bold and timeless aesthetic,” Patrizio Bertelli, the chairman of Prada, said in a statement. “At the same time, we will provide it with a strong platform, reinforced by years of ongoing investments and rooted in longstanding relationships.”

While the luxury industry has been in decline for the past couple of years, Prada has largely bucked the trend, CNN noted. Meanwhile, Versace has been operating at a loss, a downturn that’s reflected in the price Prada is paying to take over the company. Back in 2018, when Versace was bought by Capri (formerly Michael Kors) from the Versace family and Blackstone, Capri splashed out US$2.2 billion including debt.

The merger is a rather interesting move for Prada. At the end of the 1990s, the Italian fashion house acquired companies such as Jil Sander and Helmut Lang, which Bertelli went on to call “strategic mistakes,” CNN wrote. Since then, it hasn’t engaged in any major deals—until now. With Versace appealing to a different sort of customer—its bold designs contrast with Prada’s more minimalistic vision—it may bring more shoppers to the Prada group. And it strengthens Italy’s standing in the fashion world, which is largely dominated by French conglomerates like LVMH and Kering.

“Versace has huge potential,” Andrea Guerra, the CEO of Prada, said in a statement. “The journey will be long and will require disciplined execution and patience.”

Although it’s possible that Capri was looking to offload Versace, it’s another blow to the U.S.-based fashion group. Just last year, Capri was looking to merge with Tapestry, which owns brands including Coach and Kate Spade. That US$8.5 billion deal was called off in November, however, after the Federal Trade Commission sued to block the agreement.

Now Versace will be part of the Prada family and hope to experience the same growth as its parent company, as last year, revenues at Prada Group jumped 15 per cent, to more than US$6 billion.

This story was first published on Robb Report USA. Featured photo by John Keeble/Getty Images