Confirmed: Michael Kors buys Versace for $2.1 billion

US luxury group Michael Kors has confirmed they will purchase Milanese fashion house Versace for $2.1bn.

Donatella Versace, who has helmed the company with her brother Santo and daughter Allegra for the past twenty years, will continue to lead the creative side of the business, with all three Versace family members set to become shareholders in the new entity.

Donatella described the sale as a “very exciting moment” for the brand her brother Gianni founded in 1978; one that “will allow Versace to reach its full potential.”

Versace’s CEO, Jonathan Akeroyd, will also remain in place, along with the rest of the senior management team.

“We are extremely fortunate to be able to acquire such an extraordinary brand with an incredibly talented team,” said John D. Idol, Chairman and Chief Executive Officer of Michael Kors Holdings Limited.

Private equity firm Blackstone Group, which bought a 20% stake in the Italian fashion house four years ago, will sell its holding.

The move is part of a wider expansion strategy for the Michael Kors group, which is to be renamed Capri Holdings. The name, the company said in a statement, is “inspired by the fabled island which has long been recognized as an iconic, glamorous and luxury destination.”

The Michael Kors group has made no secret of its ambition to grow its portfolio of high-end brands after snapping up British shoemaker Jimmy Choo for $1.2 billion (£896 million) last year.

Sales of Kors’ own brand, which was built on accessibly priced handbags and accessories, have suffered in recent years, but following the Choo acquisition the group announced a 26.3 per cent rise in revenue in the quarter ending in June 2018, with Choo contributing 17.2 per cent of the overall figure.

As bricks and mortar retail suffers, and those that would typically buy a $200 Michael Kors handbag in a shopping mall move their spending online, ‘affordable luxury’ brands like Kors have seen a decline in sales. The push into the higher end of the luxury category serves as a defence for the next economic downturn – those that can afford a Versace dress are among those most likely to continue to spend during a recession.

The move also signals an effort from Kors to position itself as a competitor to the major European luxury conglomerates such as Richemont and LVMH. The Michael Kors group is competing with rival Tapestry Inc., owner of the Coach and Kate Spade brands, to build the first major American multi-brand fashion empire. In acquiring Versace, famous for full-blown Italian glitz and glamour, Kors has added a premium, red carpet brand to its growing group.

Capri Holdings plan to increase the number of Versace outlets from 200 to 300 stores and double the brand’s turnover to $2bn, partly by boosting the percentage of men’s and women’s footwear and accessories - a category that is often more affordable and faster-selling - from 35% to 60% of revenues.

The sale of Versace marks a turning point in the brand’s history. Founded in 1978, it has been majority-owned by members of the Versace family since its inception.

“We believe that being part of this group is essential to Versace’s long-term success,” Donatella said in a statement. “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.”