In the latest mega-fashion industry acquisition, Tapestry, the parent company of luxury accessory brand Coach, announced its merger with luxury fashion company and Versace owner Capri Holdings on Thursday in a deal worth roughly $8.5 billion.

Capri Holdings also owns the luxury labels Michael Kors and Jimmy Choo.

Tapestry's brands include Kate Spade and Stuart Weitzman.

The combined companies will operate under the name Tapestry. Together, they represent global annual sales in excess of $12 billion and a presence in over 75 countries.

The boards of Tapestry and Capri have approved the deal. It is expected to close next year, but still needs approval from Capri's shareholders.

"The combination of Coach, Kate Spade, and Stuart Weitzman together with Versace, Jimmy Choo, and Michael Kors creates a new powerful global luxury house," Tapestry CEO Joanne Crevoiserat said in a prepared statement.

"By joining with Tapestry, we will have greater resources and capabilities to accelerate the expansion of our global reach while preserving the unique DNA of our brands," Capri Chairman and CEO John Idol said.

As a result of the acquisition, Tapestry hopes to compete more aggressively with enormous European fashion conglomerates like Gucci owner Kering and LVMH Moët Hennessy Louis Vuitton.

Kering, based in France, acquired a 30% stake in Italian fashion house Valentino in July. Under the terms of the deal, Kering has the option to buy Valentino outright in the next four years. Meanwhile, LVMH bought famed jewelry company Tiffany in 2021.

Once its deal goes through, Tapestry will become the fourth largest luxury company in the world, with a combined market share of around 5.1% of the luxury goods market, according to research firm GlobalData PLC.

In the Americas, the company will become the second largest luxury player behind LVMH, with a combined share of 6% of the luxury goods market, GlobalData said.