Tapestry, the parent company of Coach, Kate Spade and Stuart Weitzman, announced on Thursday that it has agreed to buy Capri Holdings, the owner of Michael Kors, Versace and Jimmy Choo, in a cash deal valued at $8.5 billion (€7.7 billion).

The deal will create a new powerful global luxury house with six iconic brands and more than $12 billion in annual sales.

The acquisition will allow Tapestry to compete more effectively with its European rivals, such as Kering and LVMH, which have been expanding their portfolios with high-end brands such as Valentino and Tiffany. Tapestry said that the combination will also enhance its growth opportunities, operational efficiencies and geographic diversification.

Tapestry CEO Joanne Crevoiserat said in a statement that the deal “creates a new powerful global luxury house” that will offer “a broad range of lifestyle and luxury products across footwear, accessories, clothing and handbags”. She added that the deal will also “deliver significant value to our shareholders”.

Capri chairman and CEO John Idol said that the deal will provide “greater resources and capabilities to accelerate the expansion of our global reach while preserving the unique DNA of our brands”. He said that Capri’s brands have “strong momentum” and are well-positioned for long-term growth.

Under the terms of the agreement, Capri shareholders will receive $57 per share in cash, representing a premium of about 59% to the 30-day volume weighted average price ending Wednesday. The boards of both companies have unanimously approved the deal, which is expected to close in 2024, subject to regulatory approvals and customary closing conditions.

The deal sent Capri’s shares soaring more than 58% in premarket trading on Thursday, while Tapestry’s shares fell 3%. Tapestry said that it expects to generate about $200 million in cost savings from the combination within three years.

Capri Holdings Limited (formerly Michael Kors Holdings Limited)