Capital One Financial is set to acquire Discover Financial Services according to a report from The Wall Street Journal. The deal, which could be announced as early as Tuesday, would bring together two of the largest credit card issuers in the U.S. and significantly expand Capital One’s credit-card offerings.
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 February 16, 2024. The transaction is entirely in stock consideration.
The merger between Capital One and Discover has powerful strategic implications.
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Payments Network Expansion: Discover has built a valuable global payments network with over 70 million merchant acceptance points across more than 200 countries and territories. Despite this impressive reach, it remains the smallest of the four U.S.-based global payments networks.
By acquiring Discover, Capital One gains scale and investment, enabling the Discover network to compete more effectively with larger payment networks and companies.
When the transaction closes, Capital One shareholders will own approximately 60% of the combined company, while Discover shareholders will own the remainder.
The acquisition brings together two companies with long-standing track records of delivering attractive financial results, award-winning customer experiences, breakthrough innovation, and financial inclusion.
Discover has built a valuable global payments network with 70 million merchant acceptance points across more than 200 countries and territories. However, it is currently the smallest of the four US-based global payments networks.
By acquiring Discover, Capital One aims to add scale and investment to enhance the Discover network’s competitiveness with larger payments networks and companies. This move aligns with Capital One’s goal of building a globally competitive payments company.
The combined credit card business will be better positioned to deliver industry-leading products and experiences for consumers, small businesses, and merchants.
The combination of Capital One and Discover is expected to generate $2.7 billion in pre-tax synergies and add at least 15% to adjusted earnings per share by 2027. This strategic merger aims to create a formidable force in the credit card industry by combining the networks and capabilities of both companies.
Capital One: Known for its commitment to modern technology, Capital One has been building a payments and banking company that leverages innovation and customer-centric experiences.
Discover: With a global payments network spanning over 200 countries and territories, Discover has established itself as a leader in merchant acceptance points.
Discover’s global payments network boasts an impressive 70 million merchant acceptance points, yet it remains the smallest of the four US-based global payments networks. The acquisition by Capital One adds scale and investment, positioning Discover to compete more effectively with larger payments networks and companies.
This move aligns with Capital One’s long-standing vision to work directly with merchants, leveraging its customer base, technology, and data ecosystem to drive sales for merchants while providing great deals for consumers and small businesses.
LinkedIn News Summary
Capital One has reached a deal to buy Discover Financial valued at $35.3 billion, the company announced late Monday. The sale will create the largest U.S. credit-card company by loan volume, according to Bloomberg, and is the largest deal in the world so far this year. The acquisition reflects a more than 26% premium over Discover’s current share price. If the deal passes muster with regulators, buying a credit card network will give Capital One a new source of revenuein the form of merchant fees.
- Capital One has in recent years been working to attract premium customers like Discover’s, who spend more and are more loyal, per Bloomberg.
- Discover shares dropped significantly last year, after the company revealed it had found some compliance issues; its CEO subsequently stepped down.