Prada has announced plans to buy its rival Versace in a major deal worth $1.36 billion (£1.06 billion), marking a big move to bring together two of Italy’s most well-known luxury fashion houses.

The deal, revealed on Thursday by the Prada Group, will see Versace become part of a growing fashion empire that already includes brands like Miu Miu and high-end shoe label Church’s.

“We aim to continue Versace’s legacy celebrating and re-interpreting its bold and timeless aesthetic,” said Prada chairman Patrizio Bertelli.

By acquiring Versace, Prada hopes to form a stronger fashion group that can better compete with French luxury giants like LVMH and Kering.

Talks between Prada and Capri Holdings, Versace’s current parent company, began in February.

Although Capri bought Versace in 2018 for $2.15 billion, Prada’s purchase price is significantly lower. The deal also includes taking on Versace’s existing debts.

Versace has recently struggled financially, facing losses due to a global dip in luxury fashion demand. Capri Holdings also owns brands like Jimmy Choo and Michael Kors.

Prada’s CEO Andrea Guerra said the company sees great opportunity in Versace but acknowledges the work ahead:

“Versace has huge potential. The journey will be long and will require disciplined execution and patience.”

In March, Donatella Versace stepped down from her long-standing role as creative director after nearly three decades. She took the position in 1997 following the death of her brother, Gianni Versace. Now, at 69, she has taken on a new role as Versace’s chief brand ambassador.

Dario Vitale, formerly design and image director at Miu Miu, has been named the new chief creative officer of Versace.