The stock's steep decline knocked about $50 million off the value of the deal, bringing the total transaction price to $1.35 billion, which includes about $500 million of Nine West debt to be assumed by Jones.

The companies announced the deal late Tuesday following widespread speculation that a transaction was in the works.

The deal will combine Jones, best known for women's clothing sold under the names Jones New York, Evan-Picone and Todd Oldham, with footwear brands like the flagship Nine West, Amalfi, Bandolino and Selby.

Nine West has been hurt in recent months by declining demand and excess inventory. In December, the White Plains, N.Y., company announced plans to close at least 70 of its 1,095 U.S. stores and cut capital spending.

Nine West also is the target of a Federal Trade Commission investigation into its pricing policies.

"There are concerns that Jones is inheriting a bigger problem, and investors are heading for the door," said one takeover-stock trader who spoke on condition that he not be identified.

Wall Street analysts also noted that Jones will be moving into a whole new arena with the Nine West acquisition.

"We believe that an acquisition of this magnitude potentially could present certain challenges to Jones Apparel Group, given Nine West's size and its focus on footwear and accessories rather than apparel, Jones' area of historical expertise, and Nine West Group's difficult performance over the past several quarters," BancBoston Robertson Stephens analyst Alexandra DalPan wrote in a note to investors.

Shares of Bristol, Pa.-based Jones were down $3.06 to $22.94 in late-morning trade on the New York Stock Exchange. Company officials were not immediately available to comment on the stock's decline.

Nine West shares edged up 50 cents to $23.31.

Based on the terms of the transaction and Wednesday's stock activity, Jones will pay about $24.50 per share in cash and stock for each of Nine West's 34 million outstanding shares.

Nine West can terminate the deal if the Jones stock price averages less than $21 during a certain period before the deal is finalized.