Designer to buy Versace for $2.1bn and change name to Capri Holdings

Following the close of the acquisition, Michael Kors will change its name to Capri Holdings, inspired by an "iconic, glamorous and luxury destination" island, the company said on Tuesday.

It plans to grow Versace to $2 billion in revenue globally and increase its retail footprint from roughly 200 to 300 stores. It also expects to expand accessories and footwear from 35% to 60% of revenues

The deal marks one of the first times an American company has cracked the code of super high-end luxury fashion, typically controlled by LVMH, the owner of Guerlain and Givenchy, and Kering, the owner of Balenciaga and Yves Saint Laurent. Michael Kors had already dipped its toes in European fashion, last year buying shoe brand Jimmy Choo for $1.2 billion.

As part of the deal, Donatella Versace, who has helped run the company since her brother Gianni was murdered in 1997, will stay on to oversee the label. Donatella, her brother Santo and daughter Allegra will also stay on as shareholders in the company. Versace's management team will continue to be led by its CEO, Jonathan Akeroyd.

In a statement, Donatella said:

We are all very excited to join a group led by [Michael Kors CEO] John Idol, whom I have always admired as a visionary as well as a strong and passionate leader. We believe that being part of this group is essential to Versace's long-term success.

Michael Kors said Tuesday that following the deal, the company hopes to reduce its proportion of business in the Americas from 66 percent to 57 percent, while increasing its European business from 23 percent to 24 percent and Asian business from 11 percent to 19 percent.

According to CNBC:

The global market for personal luxury goods was estimated to be worth $307 billion in 2017, according to recently filed registration documents for luxury marketplace Farfetch, which went public last week. The luxury market is expected to reach $446 billion by 2025, according to the data.

The push further into luxury serves also as a defense for the next economic downturn, more than a decade after the last one in the U.S. Those that can afford a Versace dress are among the most likely to continue to spend during a recession than those who shop more affordably, industry experts say.

Michael Kors has been eyeing the luxury space for quite some time. Both it and competitor Tapestry suffered the repercussions of expanding their affordable luxury brands too widely, thereby diluting their stature in the process. Meantime, the malls in which shoppers often pick up their affordable luxury brands have become increasingly desolate as shoppers head online.

Donatella Versace, sister of the fashion house's late founder Gianni Versace, will "continue to lead the company's creative vision." She continued by assuring Versace fans that, "My passion has never been stronger. This is the perfect time for our company, which puts creativity and innovation at the core of all of its actions, to grow."