Italian luxury brands Prada and Versace are often pitted as rivals in the fashion world for their diverse looks|Dimitry B.|CC BY 2.0

Ownership of Versace is returning to its home country. Italy’s luxury fashion powerhouse Prada is buying it for $1.38 billion from US-based Capri Holdings, which failed to revive the weakening sales.

The all-cash deal is Prada’s most expensive purchase in its 112-year history.

Capri, which owns Michael Kors and Jimmy Choo, bought Versace for $2.12 billion in 2018 and is giving it up for a lower price amid a slowdown in the luxury market and to reduce debt.

It was under pressure to sell Versace after the FTC blocked a $8.5 billion merger between Coach owner Tapestry and Capri last year.

The move marks a pivot for Versace, which saw its creative director of 27 years, Donatella Versace—sister of deceased founder Gianni Versace—step down in March.

Prada and Versace are often pitted as rivals in the world of fashion for their diverse looks.