It's official: Michael Kors is buying Versace.

Michael Kors (KORS) gained a foothold in the world of elite European fashion on Tuesday by striking a €1.8 billion ($2.1 billion) deal for the storied Italian brand.

"The acquisition of Versace is an important milestone for our group," John Idol, chairman and CEO of Michael Kors, said in a statement.

Following the deal, Michael Kors will change its corporate name to Capri Holdings, in what it described as a nod to the "iconic, glamorous and luxury destination."

Michael Kors said it plans to grow Versace's sales to $2 billion annually, open more stores, improve the brand's e-commerce services and expand its accessories and footwear businesses.

The US company said that Donatella Versace, sister of the fashion house's late founder Gianni Versace, would "continue to lead the company's creative vision."

"My passion has never been stronger," she said in a statement. "This is the perfect time for our company, which puts creativity and innovation at the core of all of its actions, to grow."

The purchase could help Michael Kors compete against rival fashion groups like Louis Vuitton owner LVMH (LVMHF) and Tapestry (TPR), the parent of Coach and Kate Spade. Last year, Michael Kors bought London-based shoemaker Jimmy Choo for $1.2 billion.

Neil Saunders, managing director of the consultancy GlobalData Retail, said that it was essential for Donatella Versace to remain with the company.

"Her vast experience in luxury retail will be extremely valuable to the new group, especially as it ramps up international expansion," he said.

Still, Saunders said there was a "lot of work to be done" to boost Versace sales.

"It is notable that synergy savings are not a core part of the announcement today, which is perhaps a recognition of the fact that spending will be needed to create superior growth," he said.

Shares in Michael Kors were flat. The stock plummeted 8% on Monday following reports that the Versace deal was imminent.