Prada acquires Versace in €1.25 billion deal: what it could mean for Capri Holdings' stock as share price falls

In a defining moment for the luxury fashion world, Prada announced on Thursday that it will acquire Versace for 1.25 billion euros ($1.38 billion) from New York-based Capri Holdings.

This is the biggest luxury deal of the year, bringing a dramatic conclusion to Capri’s ambitious yet troubled quest to build an American fashion powerhouse to rival the likes of LVMH and Kering.

Il Sole 24 Ore had first reported in January that Prada was looking to acquire Versace.

The transaction underscores renewed confidence in the enduring appeal of Italian craftsmanship, even as global markets wobble under the strain of President Trump’s unpredictable trade policies.

For Prada, it represents a bold leap towards assembling an Italian rival to the dominant French luxury groups.

“It’s a bold and ambitious move by Prada,” commented Robert Burke, founder of Robert Burke Associates.

“The acquisition would position Prada to diversify its portfolio and compete on a larger global stage.”

Prada's share price closed 5% higher on Wednesday while Capri Holdings' share price was down by more than 11%.

Versace to enhance Prada's fashion division

With this acquisition, Versace will join the Prada Group’s growing portfolio, which already includes Prada, Miu Miu, Luna Rossa, and the celebrated pastry brand Marchesi.

The group also counts footwear names such as Car Shoe and Church’s under its banner.

This strategic expansion enhances Prada’s fashion division, adding a brand with a distinct identity and reducing dependence on the vision of Miuccia Prada.

Andrea Guerra, chief executive of Prada Group, stated that Versace would bring “a new dimension, different and complementary” to the family.

“Versace has huge potential,” he noted, while cautioning that “the journey will be long.”

Prada intends to fund the acquisition predominantly through debt, planning to borrow over one billion euros.

The deal, approved by both companies' boards, is expected to close in the second half of the year, subject to regulatory approvals.

A contrast of fortunes

The transaction highlights the stark contrast in fortunes between the two companies.

Prada has been a rare bright spot in the luxury sector’s recent downturn, reporting €5.4 billion in revenue for 2024 — a 17% increase.

The surge has been led by Miu Miu, whose retail sales soared by an astonishing 93% last year.

By comparison, Capri Holdings, which also owns Michael Kors and Jimmy Choo, has seen Versace’s performance falter.

The brand’s revenue is expected to drop to $810 million this fiscal year, down from $1 billion in 2024.

Versace has long been seen as an acquisition target, particularly after a failed bid by Tapestry, the owner of Coach and Kate Spade, which was blocked by US regulators last year.

Speculation that Prada might also pursue Jimmy Choo has so far proven unfounded.

“The Versace business is in need of a complete turnaround,” said Luca Solca, senior analyst at Bernstein.

Yet he tempered expectations, noting that Prada’s past acquisitions “leave much to be desired.”

Capri Holdings' (CPRI) stock outlook

The transaction aims to strengthen Capri’s balance sheet and enable strategic investments in its other brands, Michael Kors and Jimmy Choo.

This move is part of Capri’s strategy to increase shareholder value and focus on long-term growth for its remaining brands.

According to TipRanks, Capri Holdings faces significant financial and operational challenges, reflected in its declining revenue and profitability.

"While the company is implementing strategic initiatives and enhancing financial flexibility, the current bearish technical indicators and negative valuation metrics suggest a cautious outlook. The company’s efforts to stabilize and eventually return to growth are positive but are overshadowed by near-term risks," it said.

A future built on legacy and family ties

The personal bonds between the two fashion dynasties add a further layer of significance to the deal.

Miuccia Prada is known to be close to Donatella Versace, who took the reins of her family’s business after her brother Gianni’s tragic death in 1997.

Though Donatella stepped down as chief creative officer last month, she remains deeply involved as chief brand ambassador and has expressed her satisfaction with the deal.

Donatella Versace is said to be "delighted" to see the house her brother founded become part of a family-led Italian group, preserving the legacy of the Versace name within the fabric of Italian luxury.