Capital One Acquires Discover Financial Services for $35.3 Billion in Shares
Capital One has made a major announcement today regarding a significant acquisition. This Monday, it was revealed that Capital One is purchasing Discover Financial Services, a credit card financial institution, for $35.3 billion. The operation will be entirely paid in shares, and the deal will create the largest American card firm by loan volume.
Discover Financial Services, despite being the smallest of the four global payment networks based in the United States, has established a global payments network with 70 million merchant acceptance points in over 200 countries and territories. It is also noted that it is one of the few issuing entities that has its payment platform.
Capital One’s goal is to build a global payments firm, and this acquisition will accelerate the journey by allowing the entity to work directly with merchants, leverage its customer base, and technology to drive more sales for merchants and offer great deals for consumers and small businesses.
The deal, subject to scrutiny by competition authorities, will see Capital One paying 1.0192 treasury shares for each Discover share, representing a 26.6% premium over last Friday’s closing price. The union of these two major consumer finance brands will surpass former rivals JPMorgan Chase and Citigroup in credit card loan volume in the United States, according to data compiled by Bloomberg Intelligence.
With Discover being a digital entity, the acquisition will not be accompanied by physical bank branches. Post-acquisition, three members of Discover’s board of directors will join the Capital One board.
This historic acquisition announcement is a major move by Capital One and marks the largest global acquisition this year according to data compiled by Bloomberg. It reinforces Capital One’s vision to build a banking and payments entity powered by modern technology.
The mid-2020s is when the operation is expected to be completed if authorized, and is set to generate pre-tax synergies of $2.7 billion, including $1.5 billion in expense savings. The acquisition presents an opportunity for both entities to accelerate growth and maximize value for shareholders, all while ushering in a bright future as part of the Capital One family, said Richard Fairbank, the founder, president, and director of Capital One.