Capitol One will acquire Discover Financial Services in a $35.3 billion all-stock transaction that is expected to boost the bank’s standing in the credit card market, the bank announced Monday.
Discover shareholders will receive just over 1 (1.0192) Capitol One share for each Discover share they own, a nearly 27 percent premium based on Discover’s closing price last Friday, Capitol One said in a statement Monday night.
If the deal closes, Capitol One shareholders will own about 60 percent of the combined company, and Discover shareholders will own about 40 percent, per the statement.
“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,” Capitol One founder, chairman and CEO Richard Fairbank said in a statement.
“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,” he added.
Michael Rhodes, CEO and president of Discover, said the deal will bring together “two strong brands” and allow for expanded opportunities for shareholders and customers.
The deal is expected to close in late 2024 or early 2025 and will depend on regulatory approvals and approvals from the two companies’ shareholders.
Discover is one of the smaller credit card companies when compared with Visa, Mastercard and American Express, with a market valuation of about $27.72 billion.
Capital One issues Visa and Mastercard for most of its cards, along with a small number of cards for Discover. The deal would likely prompt at least some cards being switched over the Discover network, The Wall Street Journal reported earlier on Monday.
The deal would also give Capitol One a new source of revenue from new collected merchant fees, CNN Business reported.