The Prada Group announced a deal Thursday to buy Italy's Versace from the U.S. luxury group Capri Holdings under terms that value the fashion house at 1.25 billion euros ($1.4 billion).

Prada said the addition of Versace's "highly recognizable aesthetic … constitutes a strongly complementary addition" to its portfolio, which includes the Prada and Miu Miu fashion brands. It said Milan-based Versace offered "significant untapped growth potential.''