Michael Kors to Buy Versace for $2.1 Billion in Bid to Expand

LONDON — Michael Kors said on Tuesday that it would buy Versace, the Italian fashion house, for $2.1 billion in a bid to challenge Europe’s conglomerates at a time of rapid consolidation in the global luxury market.

The deal, which would end the independence of one of the last prominent stand-alone fashion brands, is the biggest effort yet by Kors to build an empire. To reflect its growing collection of trophy brands, Kors said, the company will change its name to Capri Holdings Limited once the deal is completed.

Kors described the purchase as a milestone in its expansion plans. The Michael Kors brand had its roots in the “middle market” of the luxury sector and relied on outlets and department stores, where deep discounting is common. But mall traffic has declined in North America — Kors’s biggest market — and shoppers were changing, too, increasingly seeking brands at the extreme of the style and price spectrum.

Acquiring Versace, led by the artistic director Donatella Versace, whose flamboyant gowns can sell for thousands of dollars, is part of the company’s strategy to woo more big spenders — and find more loyal customers in Europe and Asia. Last year, Kors bought the shoe designer Jimmy Choo for 896 million pounds, or $1.2 billion at current exchange rates.

“There are very few people you meet and say, ‘I have to work with this person and be a part of their life.’ I had that immediately with Donatella Versace,” said John Idol, the chief executive and chairman of Michael Kors, in a telephone call from Milan.

Kors, in a statement, said it was committed to investing in Versace’s growth, with a goal to increase its annual revenue from $850 million currently to over $2 billion over the next few years, as well as expand its retail network from 200 to 300 stores.

“The brand is one of the best known in the world, with huge reach and enormous growth potential, particularly in accessories and in men’s wear,” Mr. Idol said. “The addition of Versace into the fold is our latest step in creating one of the world’s leading fashion and luxury groups.”

In its announcement, the company indicated a geographical shift in strategy. The purchase will “diversify our portfolio from 66% Americas to 57% Americas, 23% Europe to 24% Europe, 11% Asia to 19% Asia.” Versace was “an opportunity to grow our group’s revenues to $8 billion in the long term.”

The deal is the latest consolidation in the fashion industry, as traditional players have scooped up smaller brands. This year alone Ermenegildo Zegna bought control of Thom Browne, while Puig acquired majority control of Dries Van Noten.

Versace, which has been controlled since its founding by the family that gave it its name, has long been considered a target for deal-making. The company sold a 20 percent stake to the Blackstone Group, the private equity giant, in 2014. And it had explored going public for several years.

Under the terms of Tuesday’s transaction, Blackstone will sell its entire holding. The Versace family will stay on as shareholders in the combined company, and the Versace brand’s chief executive, Jonathan Akeroyd, will remain in that position.

Mr. Idol said having Ms. Versace stay on at the creative helm of the brand was an “essential component” of the sale. He also said Kors would invest heavily in expanding the e-commerce operations of Versace to ramp up its global growth.

Ms. Versace, sister of Versace’s founder, Gianni Versace, said she could not wait to enter a new era for the brand that held her family name.

“I’ve been approached by many interested parties, but I know this deal is the right one for this company — both now and for our future,” Ms. Versace said. “Their passion and vision for Versace is clear and completely in line with mine.”

Kors’s own investors appear unconvinced about the acquisition. Shares in the company fell over 8 percent on Monday after reports of the deal emerged, and were up 1.2 percent in afternoon trading on Tuesday.

The company’s rebranding as Capri Holdings — an international group with a total of 18,000 employees — will occur with the closing of the deal at the end of the year. Drawn from an Italian resort island, the new name is meant to reflect the American fashion house’s emphasis on glamour and luxury — and to de-emphasize a reliance on just one brand.

Another New York rival in the luxury empire-building race has done something similar. Last year, Coach changed its name to Tapestry after buying Kate Spade and Stuart Weitzman.