MILAN (Reuters) -Prada has struck a deal to buy smaller rival Versace from Capri Holdings in a move to unite two of the biggest names in Italian fashion. The deal has an enterprise value of $1.375 billion, Prada said on Thursday.

Prada is seeking to expand, having defied a slowdown in luxury demand, while Versace has been operating at a loss. The merger strengthens Italy's hand in a luxury industry led by French conglomerates.

"We aim to continue Versace's legacy celebrating and re-interpreting its bold and timeless aesthetic," said Prada Chairman Patrizio Bertelli.

"At the same time, we will provide it with a strong platform, reinforced by years of ongoing investments and rooted in longstanding relationships," he added.

The price Prada has agreed to pay for Versace is a big discount to the roughly $2.15 billion including debt that Capri paid for Versace in 2018. Previously known as Michael Kors, Capri bought Versace from the Versace family and Blackstone.