Prada is reportedly in discussions to purchase the Versace fashion brand from US investor Capri Holdings in a deal that could reach nearly €1.5bn (£1.2bn). According to Bloomberg, the deal, which could be finalized as early as this month, would return Versace to Italian ownership and bolster Prada’s competitive standing against France’s LVMH, the owner of prestigious luxury brands like Louis Vuitton, Moët & Chandon, and Hennessy.

Founded in Milan in 1913 by Mario Prada, Prada has been led by his granddaughter, Miuccia Prada, since the 1970s. Capri Holdings, formerly known as Michael Kors, acquired Versace for $2.1bn in 2018. However, the Italian brand has struggled in recent years, with Capri reporting a 15% drop in Versace’s revenues for the final quarter of 2024, reaching $193m. It is expected to be lossmaking this financial year, with hopes to break even the next.

A sale at $1.5bn would represent a loss for Capri, given the initial purchase price. Versace’s performance has been impacted by its lack of resilient sellers, like Louis Vuitton’s luggage, which continue to perform well during slower periods. Additionally, questions remain over the future of Versace under the leadership of Donatella Versace, who has helmed the brand since the death of her brother, Gianni, in 1997.

Prada’s design boss, Miuccia Prada, acknowledged the ongoing talks, saying that the Versace deal was “on everyone’s table” at Milan Fashion Week. Prada has already completed initial due diligence and has been granted access to Versace’s latest financial and sales figures.

Capri Holdings has expressed optimism about Versace’s long-term growth, though its forecasts show declining sales from $810m this financial year to $800m the next. However, Capri projects a recovery, predicting sales will rise to $900m by 2028 and $1.5bn in the longer term. Despite this, the company’s debt was downgraded by S&P Global Ratings in February, citing concerns about performance pressures and high borrowing levels.

In recent setbacks, Capri faced a blow in 2024 when the US Federal Trade Commission blocked its attempted takeover by Tapestry, the parent company of Coach, in a deal valued at $8.5bn.

Shares in Prada rose 3.5% on Monday following news of the potential deal. Both Prada and Capri have declined to comment on the situation.