Prada has acquired Versace from Capri Holdings in a €1.25 billion ($1.38 billion) deal, including debt—uniting two of Italy’s most iconic fashion houses. The move follows months of speculation and comes amid market volatility spurred by U.S. tariffs.

Versace, known for its bold baroque designs, has been operating at a loss in recent quarters, while Prada has remained resilient in a slowing luxury market. “We aim to continue Versace’s legacy and provide it with a strong platform,” said Prada Chairman Patrizio Bertelli.

Donatella Versace, who stepped down as Chief Creative Officer in March, welcomed the acquisition. “I’m honoured the brand is now in the hands of a trusted Italian family business,” she said.

The price marks a significant discount from the $2.15 billion Capri Holdings (then Michael Kors) paid in 2018. Capri CEO John Idol said the sale strengthens their balance sheet and supports growth for Michael Kors and Jimmy Choo.

Prada, which has committed to €1.5 billion in new debt to finance the purchase, sees Versace as a strategic fit. CEO Andrea Guerra noted, “Versace has huge potential. The journey will require patience and disciplined execution.”

The deal boosts Italy’s influence in a luxury sector largely dominated by French conglomerates like LVMH.