Capital One Will Buy Discover for $35 Billion
Capital One Financial Corporation and Discover Financial Services have confirmed the rumors we covered yesterday. The two companies have entered into a definitive agreement under which Capital One will acquire Discover in an all-stock transaction valued at $35.3 billion.
Under the terms of the agreement, Discover shareholders will receive 1.0192 Capital One shares for each Discover share, representing a premium of 26.6% based on Discover’s closing price of $110.49 on February 16, 2024. At close, Capital One shareholders will own approximately 60% and Discover shareholders will own approximately 40% of the combined company.
The purchase of Discover would likely make Capital One the biggest credit card lender in the US. The two companies were ranked fourth and sixth in 2022 for credit card transaction volumes.
The acquisition will also give Discover’s payment network a major credit card partner that could kame it a major competitor once again. The U.S. credit card industry is currently dominated by Visa and Mastercard with AmEx being a distance third and Discover an even more distant fourth place.
“From Capital One’s founding days, we set out to build a payments and banking company powered by modern technology. Our acquisition of Discover is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payments companies,” said Richard Fairbank, founder, Chairman and Chief Executive Officer of Capital One. “Through this combination, we’re creating a company that is exceptionally well-positioned to create significant value for consumers, small businesses, merchants, and shareholders as technology continues to transform the payments and banking marketplace.”
“The transaction with Capital One brings together two strong brands with enhanced ability to accelerate growth and maximizes value for our shareholders, enabling them to participate in the tremendous upside of the combined company,” said Michael Rhodes, CEO and President of Discover. “This agreement underscores the strength of our business and is a testament to the hard work of Discover employees. We look forward to a bright future as part of the Capital One family and to providing expanded opportunities for our loyal customers.”
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