Shares of Versace and Michael Kors owner Capri Holdings (CPRI) skyrocketed about 57% in early trading on Thursday after fashion conglomerate and Coach owner Tapestry (TPR) agreed to buy it for $8.5 billion.

Tapestry will pay $57 per share for Capri's stock holdings, a premium of 65% on Wednesday's closing price. Since Capri revised its financial outlook earlier this year, its share price dropped by nearly 50% since February. Previously, it had traded at $68 before Capri's downward revision of expectations.

The merger will put six high-end fashion brands under one umbrella: Coach, Kate Spade, Stuart Weitzman, Versace, Jimmy Choo and Michael Kors. The new fashion giant expects expenses to be streamlined. The synergy between the two parent companies of the luxury brands will create an opportunity for cost savings of over $200 million annually, according to Tapestry.

Tapestry expects the acquisition to immediately improve its earnings per share to the tune of double digits after certain adjustments are taken into account, along with a compelling return on investment.

Becoming a possible U.S. equivalent of France's LVMH Moët Hennessy Louis Vuitton (LVMUY), the brands combined will have $12 billion in annual revenue with nearly $2 billion in operating profit. Through Capri, the owner of Versace and Jimmy Choo, Tapestry will have a more global reach, especially in Europe and Asia.

The deal comes as luxury sales are settling to a more normal level after several years of strong numbers. Slowing economic growth in the U.S. and a lagging post-pandemic recovery in China have been a drag on luxury sales.

To combat dwindling demand, Tapestry has been attempting to win over Gen Z through social media platforms such as TikTok. Its brand Coach has also cherry-picked its best sellers to focus on while reducing markdowns, a strategy it has started for Kate Spade as well.

The acquisition is not subject to any financial conditions. Bank of America and Morgan Stanley will fund through a combination of senior notes, term loans and cash, some of which will be used to pay part of Capri’s outstanding debt.

Shares of Tapestry were down about 13% at noon Eastern time, dragging them to a roughly 6.4% year-to-date loss after trading in green for most of the year. The jump in Capri shares today, offset most of the massive share price erosion since the start of the year.