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 card. Discover on the other hand offers several credit card options, with the 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.
