Milan, Italy (AFP)—Italian fashion house Prada announced Thursday it had reached a deal with US group Capri Holdings to buy its flashy rival Versace for 1.25 billion euros ($1.38 billion).

The acquisition will create a luxury group with revenues of over six billion euros that could better compete with industry giants such as the French conglomerates LVMH and Gucci owner Kering, amid a slowdown in the sector worldwide.

“We are delighted to welcome Versace to the Prada Group and to build a new chapter for a brand with which we share a strong commitment to creativity, craftmanship and heritage,” Prada group chairman and executive director Patrizio Bertelli said in a statement.

In 2018, Capri paid 1.83 billion euros (then $2.1 billion) to acquire Versace, which was previously owned 80 percent by the Versace family and 20 percent by the US investment fund BlackRock.

Amid declining sales at the Milan-based label, it put Versace up for sale, and began exclusive negotiations with Prada at the end of February.

Capri, which also owns Jimmy Choo and Michael Kors, had to accept a reduced price from Prada amid the market turmoil caused by US President Donald Trump’s tariffs.

The Financial Times reported that the price was initially expected to be about $1.6 billion but had been negotiated downwards in recent days.

Last month, Donatella Versace stepped down as creative director after more than 30 years, a move widely seen as a prelude to the accord.

She took over in 1997 following the murder of her older brother Gianni, who founded the label in 1978.

But on April 1 she was replaced as creative director by Dario Vitale, who has overseen soaring sales at Miu Miu, Prada’s sister brand targeting a younger clientele.

Donatella Versace, who turns 70 in May, is now the label’s chief brand ambassador.