Coach parent Tapestry is buying Michael Kors owner Capri Holdings in an $8.5 billion deal to better compete with Europe’s luxury fashion giants.

The deal will bring new heft to New York-based Tapestry’s portfolio, adding Capri’s Michael Kors, Versace and Jimmy Choo labels to the US group’s existing Coach, Kate Spade and Stuart Weitzman brands.

For years America’s fashion groups have lagged European “big luxury” heavyweights like LVMH and Kering, which enjoy considerable scale advantages in everything from retail and marketing to the war for talent, and have continued to grow their portfolios. Last month, French group Kering said it was buying a 30 percent stake in Valentino. In 2021, LVMH acquired Tiffany in a $16 billion deal.

US fashion players have tried to bulk up. In 2017, Tapestry, then known as Coach Inc, bought Kate Spade for $2.4 billion. Later that year, Capri, then known as Michael Kors, bought Jimmy Choo for $1.2 billion. The following year later, Capri bought Versace for $2.2 billion.

But America’s fashion groups remain small compared to their European rivals. Tapestry has a market capitalisation of about $10 billion. Capri is worth about $4 billion. By comparison, Kering is valued at about $72 billion, while sector leader LVMH, which owns 75 brands, has a market cap of $456 billion.

Stay tuned to BoF for updates on this developing story.