Capital One Acquires Discover Financial Services for $35.3 Billion
New York (CNN) — In a bold move aimed at gaining an advantage in the competitive credit card market, Capital One has acquired Discover Financial Services for $35.3 billion in an all-stock deal. Under the terms of the deal announced on Monday, Discover shareholders will receive just over one share of Capital One for each Discover share they own, representing a premium of nearly 27% over Discover’s closing stock price of $110.49 on Friday.
Upon completion of the deal, current Capital One shareholders will own a 60% stake in the combined company, with Discover shareholders holding the remaining 40%. Capital One expects the deal to close in late 2024 or early 2025.
This acquisition would position Capital One as a major player in the credit card market, with a market valuation of nearly $28 billion. By integrating Discover, which also issues its own credit cards, under the same roof, Capital One aims to gain a significant advantage over other major credit card-issuing banks such as JPMorgan Chase, Bank of America, and Citigroup.
Richard Fairbank, founder, and CEO of Capital One, expressed his confidence in the deal, stating, “This will build a payments network that can compete with the largest payments networks and companies.”
Additionally, the acquisition would open up new revenue streams for Capital One from the fees it charges merchants. Currently, Capital One issues credit cards in partnership with Mastercard and Visa, but with the potential for more of its cards to shift to the Discover network following the acquisition.
The deal is subject to regulatory approval but is expected to significantly shake up the credit card market and establish Capital One as a major player in the industry.