Michael Kors (NYSE: KORS) is acquiring Gianni Versace for $2.1 billion, including debt, providing Kors a launching pad into the exclusive high-end European luxury market.
Shares of Michael Kors closed down more than 8% Monday when news of the deal leaked. Those shares began Tuesday trading down four cents to $66.67.
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.
Kors 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.
Michael Kors said Tuesday that following the deal, the company hopes to reduce its proportion of business in the Americas from 66% to 57%, while increasing its European business from 23% to 24% and Asian business from 11% to 19%.
