Versace does not disclose financial details, but documents deposited with the Italian chamber of commerce show it had sales a year ago of 668 million euros and earnings before interest, tax, depreciation and amortisation (EBITDA) of 45 million euros.
"We believe that the strength of the Michael Kors and Jimmy Choo brands, and the acquisition of Versace, position us to deliver multiple years of revenue and earnings growth". "I am proud that Versace remains very strong in both fashion and modern culture".
Michael Kors, best known for its bags, watches and perfume, said it planned to grow the number of Versace stores worldwide by 50 percent to 300, and expand accessories and footwear from 35 to 60 percent of revenues.
The past year has seen Michael Kors and Coach (which re-branded as Tapestry after buying handbag company, Kate Spade) move toward the conglomerate model in the mold of European luxury juggernauts like LVMH Moët Hennessy Louis Vuitton and Kering (which boasts big-name brands like Dior, Gucci, Yves Saint Laurent, Balenciaga and Alexander McQueen.) For product-based brands, a well-run conglomerates offers a sort of salvation via greater resources, according to Milton Pedraza, chief executive of the Luxury Institute, a marketing research firm in NY.
The deal with Michael Kors comes after the rumoured retreat of Kering, the French fashion giant which owns luxury brands like Gucci, Yves Saint Laurent and Alexander McQueen.
"Michael Kors is not buying Versace to keep its luxury business going", Mark Weber, fashion expert and former CEO of LVMH Inc., told FOX Business.
Michael Kors has agreed to buy all of Versace's outstanding shares for a total enterprise value of 1.83 billion euros ($2.2 billion), to be funded in cash, debt and shares in Michael Kors Holding Ltd, which will be renamed Capri Holdings Ltd.
Donatella Versace said in her own statement that the sale "will allow Versace to reach its full potential", adding "We believe that being part of this group is essential to Versace's long-term success".
The designer, whose bold designs were embraced by Madonna and other mega-celebrities, was assassinated in 1997 by luxury-obsessed male prostitute Andrew Cunanan in Miami. The move is also aimed at reviving Versace, which returned to a net profit a year ago.
USA private equity firm Blackstone, which bought 20 percent of Versace for 210 million euros in 2014, will make a 156 million euro capital gain by exiting its investment, Reuters calculations show. The 40-year-old fashion house, founded by Gianni Versace, celebrates extravagance with its baroque designs, filling runway shows and red carpets with brash prints and vibrant color.
Launched in 1981, Michael Kors is named after its U.S. founder.
At the time of founder Gianni Versace's death, the company had been making plans for a listing on the New York Stock Exchange, but it has remained private ever since.