Coach parent Tapestry announced Thursday it will buy Capri Holdings for $8.5 billion in cash to create a U.S. fashion house that can compete with its larger contemporaries in Europe.

Tapestry will pay Capri shareholders $57 per share, which is equal to a premium of roughly 59% over the 30-day volume-weighted average price through Wednesday’s close.

Tapestry brands like Kate Spade and Stuart Weitzman will now be under the same roof as Capri's Jimmy Choo, Michael Kors and Versace labels.

U.S. luxury firms currently trail their European counterparts with companies like LVMH owning 75 brands that include U.S. jeweler Tiffany and fashion labels Louis Vuitton and Dior.

"The combination of Coach, Kate Spade, and Stuart Weitzman together with Versace, Jimmy Choo and Michael Kors creates a new powerful global luxury house, unlocking a unique opportunity to drive enhanced value for our consumers, employees, communities and shareholders around the world," Tapestry CEO Joanne Crevoiserat said.

In 2017, Tapestry - then known as Coach - bought handbag maker Kate Spade for $2.4 billion. In the same year, Capri, formerly known as Michael Kors, acquired British shoemaker Jimmy Choo for $1.2 billion.

LVMH closed on its $15.8 billion purchase of Tiffany in early 2021.

"We are confident this combination will deliver immediate value to our shareholders," Capri Holdings CEO John Idol said in Thursday’s 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." 

On Wall Street, Capri's shares skyrocketed Thursday by more than 56% in midday trading. Tapestry shares fell 14%.

Reuters contributed to this report.