Capital One to Acquire Discover for $35 Billion

Capital One to Acquire Discover for $35 Billion

🔃 Update: Capital One Financial Corporation and Discover Financial Services today announced that they 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.

Here’s some unexpected news in the world of credit cards. Capital One is looking to acquire Discover Financial Services in a deal that would merge two of the largest credit-card companies in the U.S.

Capital One ranked fourth in the list of U.S. credit card issuers in 2022, after Chase, American Express and Citi. It rang up $534.5 billion in credit card transactions that year. Discover is sixth in the rankings, after Bank of America, with $210.7 billion in credit card transactions.

Capital One has been improving its credit card offerings in recent year with popular business cards which now include the Venture X Business card, and the consumer Venture X card. Discover on the other hand offers several credit card options, with the Discover it card being the most popular as it has no annual fee and earns up to 5% back.

The all-stock deal could be announced Tuesday, according to people familiar with the matter, as reported by WSJ. Discover has a market value of $28 billion, and the takeover would be expected to value it at a premium to that.

In January, Discover and Capital One reported declines in fourth-quarter profits of 62% and 43%, respectively, as banks increased provisions for losses from bad loans as rising interest rates raised the risk of consumer defaults on credit card debt and mortgages. Discover Financial has a market capitalization of $27.6 billion, while Capital One is valued at $52.2 billion.