Milan: Italian luxury fashion house Prada announced on Thursday that it has finalised a deal with US-based Capri Holdings to acquire its high-profile rival Versace for €1.25 billion ($1.38 billion).

The acquisition will form a luxury group with combined revenues exceeding €6 billion, positioning it to better rival French heavyweights such as LVMH (Louis Vuitton Moët Hennessy) and Kering—owner of Gucci—amid a broader slowdown in the global luxury sector.

“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, craftsmanship and heritage,” said Patrizio Bertelli, chairman and executive director of the Prada Group.

Capri Holdings had purchased Versace in 2018 for €1.83 billion (then $2.1 billion). At the time, 80 percent of the Milan-based label was owned by the Versace family, with the remaining 20 percent held by investment firm BlackRock.

Falling sales and market pressures lead to sale

Amid a decline in sales, Versace was put up for sale and exclusive talks with Prada began in late February. The final price was lowered due to market turbulence caused by US President Donald Trump’s tariffs. According to the Financial Times, the original price tag was closer to $1.6 billion before being renegotiated.

The sale followed Donatella Versace’s decision to step down as creative director last month, ending a tenure of more than three decades. She took over the role in 1997 after the tragic murder of her brother Gianni, who founded the iconic label in 1978.

On 1 April, Donatella was succeeded by Dario Vitale, credited with strong sales growth at Miu Miu—Prada’s youth-oriented brand. Donatella Versace, who turns 70 in May, has now taken on the role of chief brand ambassador.

Contrasting fortunes of two brands

Although Versace remains associated with glamour and the jet-set lifestyle, its prominence has faded somewhat in recent years. In the third quarter of fiscal 2025, it recorded a 15 percent drop in revenue to $193 million.

Prada, in contrast, has shown strong performance under the creative direction of Miuccia Prada, granddaughter of founder Mario Prada. In 2024, the group saw net profit rise 25 percent to €839 million, with revenues up 15 percent at €5.4 billion.

Andrea Guerra, CEO of the Prada Group, acknowledged the potential of Versace but also cautioned about the path ahead. “The journey will be long and will require disciplined execution and patience. The evolution of a brand always needs time and constant focus,” he stated.

The acquisition will be funded through €1.5 billion of new debt and is expected to be completed in the second half of 2025.

Preserving Versace’s identity

The two fashion labels have stark stylistic differences—Versace known for its bold flair and Prada for minimalist sophistication. Prada noted that the addition of Versace would be “strongly complementary” to its portfolio.

The group assured that Versace would retain its “creative DNA and cultural authenticity”, while also benefiting from Prada’s “industrial capabilities, retail execution and operational expertise”.

This deal bucks a trend in which major Italian fashion names—such as Gucci, Fendi and Bottega Veneta—have come under French control.

“Prada will be able to bring light back into a brand that was dying and infuse it with new life,” said design consultant Antonio Bandini Conti.

However, Prada’s previous attempts at expansion offer a cautionary note. The company bought German label Jil Sander and Austrian brand Helmut Lang in 1999 but sold them in 2006 due to underperformance. A 25.5 percent stake in Roman fashion house Fendi was also sold to LVMH a year after their joint acquisition in 2000.

Luca Solca, an analyst at Bernstein, warned, “I see a risk for Prada to become distracted from its core business.”

AFP