Fashion power shift: Prada to buy Versace for €1.25bn from Capri to challenge luxury giants

In a landmark move that reshapes the landscape of luxury fashion, Prada S.p.A. has entered into a definitive agreement to acquire 100% of Gianni Versace S.r.l. from Capri Holdings Limited for a cash consideration based on an enterprise value of €1.25 billion (approximately $1.375 billion). The deal, expected to close in the second half of 2025, underscores a growing trend in the luxury market where iconic heritage brands seek consolidation to scale operations and expand global reach.

The agreement positions Prada—already a powerhouse in high fashion—as a stronger competitor to conglomerates such as LVMH and Kering. For Capri Holdings, the divestiture of Versace allows it to refocus on its remaining brands, Michael Kors and Jimmy Choo, with renewed strategic and financial flexibility. The transaction has been unanimously approved by both boards, pending regulatory clearance and customary closing conditions.

What makes Versace a strategic fit for Prada Group?

Versace, founded in 1978 in Milan, has become synonymous with bold aesthetics, Italian glamour, and a provocative sense of style. Over the past six years, Capri Holdings has worked to elevate the brand, aligning its product strategy with high-luxury positioning and expanding its retail and digital presence globally.

For Prada Group, acquiring Versace represents a major expansion in both creative diversity and market segmentation. The brand’s distinct visual identity—steeped in ornate design, cultural provocation, and celebrity appeal—offers a sharp contrast to Prada’s minimalism and Miu Miu’s youthful experimentation. Prada sees Versace as a high-potential growth engine capable of benefiting from the Group’s vertically integrated infrastructure, including production, distribution, and operational excellence.

According to Prada Group Chairman Patrizio Bertelli, the goal is to preserve Versace’s legacy while offering it a platform for sustainable long-term growth. He described the acquisition as a step forward in “re-interpreting its bold and timeless aesthetic,” while Prada Group CEO Andrea Guerra emphasised the need for “disciplined execution and patience” to realise the brand’s untapped value.

How will the acquisition be financed and structured?

The €1.25 billion all-cash transaction will be financed through €1.5 billion in new debt—split between a €1 billion term loan and a €500 million bridge facility. The final purchase price will be adjusted at closing to reflect Versace’s net working capital and financial position. The deal structure also includes tax loss carry-forwards, enhancing financial efficiency for Prada post-acquisition.

Despite the size of the deal, Prada Group retains balance sheet flexibility, supported by undrawn committed credit lines and existing cash reserves. The financial structure signals confidence in Prada’s future cash flows and its ability to absorb Versace without compromising liquidity or operational investments.

The transaction is backed by major financial institutions including Citigroup, Goldman Sachs, BNP Paribas, and Intesa Sanpaolo, ensuring robust execution support. Legal and regulatory reviews are expected to conclude before year-end.

How did Capri Holdings justify selling Versace?

For Capri Holdings Limited, the sale of Versace marks a strategic pivot aimed at reinforcing the company’s financial foundation and long-term vision. CEO John D. Idol framed the decision as a value-maximising step that allows Capri to deepen its investment in Michael Kors and Jimmy Choo, streamline its brand architecture, and reduce overall leverage.

Idol acknowledged Versace’s growth during its six-year run under Capri, noting enhancements in luxury product development, marketing, and retail store experiences. With the sale, Capri gains flexibility to execute shareholder-oriented strategies, including debt reduction, capital expenditure on core brands, and potential share repurchase programs.

The company is expected to channel the sale proceeds into Michael Kors’ continued repositioning toward the premium fashion segment and to accelerate innovation and digital strategies at Jimmy Choo.

What has been the stock market reaction?

The transaction has triggered contrasting investor sentiment for both Prada S.p.A. and Capri Holdings Limited.

Prada S.p.A. (HKEX: 1913)

Following the announcement, Prada’s shares rose by 4.93% on April 10, 2025, closing at HKD 47.85. The market welcomed the acquisition as a forward-looking move, driven by Prada’s 17% year-on-year revenue growth in FY2024 and a strong net cash position of €600 million. The upward momentum signals investor confidence in Prada’s ability to integrate Versace without operational disruption or financial overreach. Analysts are bullish on Prada’s stock, with buy ratings linked to its growing brand portfolio, international expansion, and long-term strategy execution.

Capri Holdings Limited (NYSE: CPRI)

Capri Holdings, by contrast, experienced an 11% drop in its share price, closing at $14.53 on the day of the announcement. The decline likely stems from concerns over the sale price, which was substantially below the $2.1 billion Capri paid to acquire Versace in 2018. Investors are also weighing the loss of one of its most prestigious assets. However, analysts offering a more nuanced view suggest a “hold” position on Capri stock, recognising that the deal improves the company’s leverage profile and allows for a sharper focus on core brand turnaround efforts.

The mixed reaction highlights the diverging narratives: Prada betting on growth through acquisition, and Capri banking on strategic consolidation.

What does this mean for the luxury fashion sector?

The Prada-Versace deal is one of the most consequential realignments in recent fashion history. It exemplifies the broader consolidation trend reshaping the luxury landscape, where mid-sized players are increasingly merging or being acquired to compete against behemoths like LVMH and Kering. By combining two Italian powerhouses, Prada aims to build scale without sacrificing creative integrity.

Versace brings with it an influential following among younger luxury consumers, especially in North America and Asia. Its strong cultural resonance, rooted in celebrity endorsements and high-profile fashion moments, provides an edge in experience-driven luxury consumption. Meanwhile, Prada’s robust manufacturing, supply chain, and retail execution capabilities could help expand Versace’s global footprint in a more cost-effective and disciplined manner.

Industry observers view the deal as a vote of confidence in the resilience of the global luxury market, which continues to outperform despite macroeconomic headwinds. Demand in the U.S., Middle East, and Asia remains strong, and fashion houses with diversified brand portfolios and clear digital strategies are increasingly seen as best positioned to weather volatility.

What’s next for Versace within Prada Group?

Versace is expected to retain its creative direction and brand identity under the Prada umbrella. No major management changes have been announced, and Prada Group has emphasised that the brand’s DNA will remain untouched. This hands-off approach mirrors that of larger luxury conglomerates, where autonomy is preserved within a shared operational structure.

Over the long term, Prada is likely to focus on improving Versace’s profitability through supply chain efficiency, category expansion, and digital engagement. The integration process will be closely monitored by investors and fashion insiders alike, as the Group navigates the challenges of preserving creativity while achieving synergies.

With this acquisition, Prada Group takes a significant step toward establishing itself as a full-spectrum luxury platform. If executed successfully, the deal could serve as a blueprint for future luxury consolidation strategies.