(Bloomberg) -- Capri Holdings Ltd. shares jumped as the U.S. company moves closer to a sale of its Italian luxury brand Versace to Prada SpA.

The Italian family-owned company and Capri have agreed to a price of as much as €1.5 billion ($1.6 billion) for the fashion house founded by the late Gianni Versace in 1978, people familiar with the matter said late Sunday.  

Capri Holdings rose as much as 9.6% before the start of regular trading in New York on Monday. Prada shares gained as much as 4.1% in Hong Kong, where the stock was listed in 2011 in a nod to the importance of the Chinese market.

A potential acquisition of the fashion house renowned for its flashy ready-to-wear clothing designed by Donatella Versace — sister of the founder — would allow Prada to create a larger Italian player to compete with global luxury groups such as LVMH and Kering SA.

Capri, which also owns the Michael Kors and Jimmy Choo brands, has been struggling to revive sales growth and last month provided revenue guidance that missed analysts’ estimates, saying a turnaround will take some time. 

Rating Cut

Its planned $8.5 billion merger with Coach owner Tapestry Inc. collapsed last November after a judge agreed with the Federal Trade Commission’s opposition to the deal — adding to Capri’s difficulties. Its debt was downgraded to below investment grade by S&P Global Ratings in February.

Milan-based Prada and Capri could finalize a deal for Versace this month, said the people, asking not to be identified because discussions are private. Talks are progressing after initial due diligence didn’t find any risks, the people said.

The timing and valuation could change and negotiations could still fall apart, the people added. Capri, which bought Versace in 2018 for about €1.8 billion, didn’t immediately respond to requests for comment on Sunday. Prada declined to comment.

Prada emerged as one of the luxury sector’s winners amid a global downturn for high-end fashion items, and is set to report earnings Tuesday. Its sales surged in the third quarter of last year on the back of its Miu Miu brand, a label popular with younger consumers.

A purchase would run counter to a decades-long trend of Italian fashion groups, including Gucci and Valentino, being taken over by foreign firms. 

“Prada would be well positioned to realise Versace’s brand potential in the long term, potentially paving way for the group to become Italy’s answer to the French luxury conglomerates,” UBS Group AG’s analysts led by Susy Tibaldi said in a Feb. 28 note.

The aesthetics of the minimalistic Prada and “maximalist” Versace “are polar opposites” and wouldn’t run the risk of cannibalization, the UBS analysts said in a note. 

--With assistance from Subrat Patnaik.

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