MILAN, Italy - Italy's Versace agreed a deal with Blackstone on Thursday that will see the U.S. private equity firm take a 20 percent stake in the fashion house in a deal valuing the company at one billion euros (823.31 million pounds).

Blackstone will inject 150 million euros of fresh capital into Versace and will also buy 60 million euros of shares from family holding company GIVI Holding, the fashion house said.

The deal implies an enterprise value for Versace, whose signature Medusa head logo appears on its clothes and accessories, of one billion euros, the company said.

Versace said the family of founder Gianni Versace will remain at the heart of the company.

Gianni's sister Donatella, brother Santo and niece Allegra have wholly owned the company since Gianni's murder in 1997, with 20 percent, 30 percent and 50 percent stakes respectively.

The brand reversed years of losses to return to profit in 2011, a turnaround which many partly attribute to Chief Executive Gian Giacomo Ferraris, a luxury industry veteran who took the helm in 2009.

Analysts and luxury industry observers say the brand needs rejuvenation.

"This is a very large and very well-known brand so it could be revived in the same way as Valentino, but a lot of work has to be done on the creative side. The brand has to be updated and they need new ideas." Luca Solca of Exane BNP Paribas said.

Versace said it expected to see an 18 percent rise in its 2013 revenues to nearly 480 million euros, while core earnings should increase by over 50 percent to at least 69 million euros. The results are expected at the end of March.

(Reporting by Isla Binnie and Stephen Jewkes; editing by Jason Neely)