Michael Kors is going high end.

The handbag maker is acquiring the Gianni Versace fashion house for $2.1 billion, including debt, providing Kors a launching pad into the exclusive European luxury market.

Shares of Michael Kors were down slightly near midday Tuesday, after closing down more than 8 percent Monday when news of the deal leaked. Shares of rival Tapestry, the parent of Coach and Kate Spade, were down fractionally.

After deal closes, Michael Kors will change its name to Capri Holdings, inspired by an "iconic, glamorous and luxury destination" island, the company said. It will retain the Michael Kors brand name.

It plans to grow Versace to $2 billion in revenue globally and increase its retail footprint from roughly 200 to 300 stores. It also expects to expand accessories and footwear from 35 percent to 60 percent of revenue.

The deal marks one of the first times an American company has cracked the code of super high-end luxury fashion, typically controlled by LVMH, the owner of Guerlain and Givenchy, and Kering, the owner of Balenciaga and Yves Saint Laurent. Michael Kors had already dipped into European fashion last year by buying shoe brand Jimmy Choo for $1.2 billion.

As part of the deal, Donatella Versace, who has helped run the company since her brother Gianni was murdered in 1997, will stay on to oversee the label. Donatella, her brother Santo and daughter Allegra will also stay on as shareholders in the company. Versace's management team will continue to be led by its CEO, Jonathan Akeroyd.

That retention will be crucial to Kors as it looks to validate itself to other premium European brands and their visionaries.