Neither Versace nor Kors responded to a request for comment.
Twenty per cent of Versace, known for its Medusa head logo, was bought by US private equity group Blackstone in 2014, and the family owns the rest.
The group, founded by designer Gianni Versace in 1978, boasted sales of 686 million euros in 2016 and turnover is expected to exceed one billion euros in the "short term", CEO Jonathan Akeroyd said in June.
The transaction would be intended to position Michael Kors more fully as a competitor to Paris-based LVMH and Kering and the Swiss company Richemont among global heavyweights in luxury across various product lines, analysts said.
Michael Kors, a maker of handbags and apparel and named for its founder who appeared on reality-show "Project Runway," took a major step in luxury with the 2017 acquisition of Jimmy Choo PLC in 2017 for $1.4 billion.
"The news of Versace's acquisition by Michael Kors Holdings will come as quite a shock to followers, admirers and customers of the iconic Italian brand, which has always been characterized by its fierce narrative and aesthetic as well as its strong family values and independence," said a note from Euromonitor International analyst Florence Allday.
"However, several years of a difficult global luxury climate, declining growth and stiff competition from brands like Louis Vuitton, Gucci and Dior, make the sale less surprising."
The deal would give Michael Kors the ability to "properly compete with Kering's power brand, Gucci," she added, noting that the consolidation in the fashion creates risks of for smaller brands that stay independent "of being left behind" and unable "to afford the exposure" of a bigger company.
Shares of Kors fell 7.4 per cent to $67.32 in mid-morning trading in New York.
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