Prada made the biggest purchase in its history by buying Versace for $1.4 billion, bringing the two Italian luxury labels together

Luxury major Prada will buy Versace for $1.38 billion from American parent company Capri Holdings.

The long-anticipated deal will bring together two leading Italian labels in the luxury segment, albeit with diverging fortunes.

“The acquisition of Versace marks another step in the evolutionary journey of our Group, adding a new dimension, different and complementary,” Andrea Guerra, CEO of Prada, said in a release. “Versace has huge potential. The journey will be long and will require disciplined execution and patience.”

Speculation before the deal’s finalization suggested Prada had negotiated down its initial purchase price of Versace owing to tariff-related pressures.

The purchase, which is Prada’s largest in its 112-year history, could be a big boost for the company amid a period of sector-defying growth.

Prada reported a 15% jump in annual net sales worth €5.4 billion ($6 billion) in March. Miu Miu, Prada’s sister brand, has been instrumental in the company’s recent growth streak, as its revenues soared by 93% last year.

Prada’s acquisition of Versace makes “strategic sense since both of these brands pass through fashion cycles and ownership of multiple brands with very different aesthetics (maximalist for Versace and minimalist for Prada and Miu Miu) could help smooth the cyclicality of performance,” Morningstar’s senior equity analyst Jelena Sokolova said in a note Thursday.

The deal comes at a tricky time for luxury purveyors, many of whom have been impacted by a pull-back in consumer spending. Tariffs would have added yet another hurdle for the sector by hurting consumer sentiment and pushing prices up. However, a 90-day pause on the levies against Europe could give companies more time to strategize their path forward.

Prada’s shares were up nearly 5% as of 2 p.m. London time.

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