Coach parent Tapestry is nearing a deal to buy Michael Kors-owner Capri Holdings, the Wall Street Journal reported late on Wednesday, as the US fashion house looks to bulk up its portfolio to take on larger European rivals.

Capri’s shares surged about 23 percent in premarket trading on Thursday, while Tapestry’s shares were flat.

US luxury firms have consistently lagged behind their European peers such as LVMH, whose 75 brands include US jeweller Tiffany & Co. as well as fashion labels Louis Vuitton and Dior.

The deal would bring Tapestry’s brands, which also includes Kate Spade, together with Capri’s Jimmy Choo and Versace labels under one roof.

The combination of the two firms also gives some heft to the US retail landscape, which has been grappling with weaker demand in the country as well as its key market China as sticky inflation dents consumer spending.

The deal could be announced as soon as Thursday, WSJ reported, citing people familiar with the matter, adding that including a premium, Capri could be valued in the “high single-digit” billion-dollar range.

Capri had a market capitalisation of $4 billion as of Wednesday’s close, while Tapestry was valued at about $10 billion, according to Refintiv data.

Tapestry and Capri did not immediately respond to Reuters’ request for comment on the report.

In 2017, Tapestry — then known as Coach Inc — bought handbag maker Kate Spade for $2.4 billion. In the same year, Capri, formerly known as Michael Kors, bought British shoemaker Jimmy Choo for $1.2 billion.

A year later, Capri bought Versace for $2.2 billion.

The potential acquisition of Capri also marks a revival in deal-making in the US luxury space, while European majors keep growing their portfolio by snapping up more high-end brands.

Last month, French luxury group Kering, which is struggling to revive sales at its star brand Gucci, said it was buying a 30 percent stake in Italian fashion label Valentino. LVMH closed its$15.8 billion acquisition of Tiffany in early 2021.

Capri was set to report first-quarter earnings on Tuesday before delaying them to Thursday morning without providing a reason.

By Chandni Shah; Editor: Sonia Cheema