Ann's shares rose to $46.25 in premarket trading on Monday, while Ascena's shares were up nearly 7 percent at $15.20.
The transaction gives Ann an enterprise value of about $2 billion, Ascena said.
Ascena said it expects the deal to be "significantly accretive" to earnings in the first year after the deal closes and to boost profit by more than 20 percent after that.
Read MoreBrait to pay $1B for control of retailer New Look
"With the addition of the Ann Taylor and LOFT brands, Ascena will become one of North America's largest and most diversified specialty apparel retailers," Ascena Chief Executive David Jaffe said in a statement.
Ascena said it expects the deal to close in the second half of 2015.