A $35.3 billion all-stock merger between Capital One and Discover Financial was announced. With this acquisition, Capital One would become the payments industry titan, with more than 100 million consumers.
Capital One has around $479 Billion in assets, which makes it one of the biggest banks in the United States. It offers credit cards through networks managed by Mastercard and Visa. It will increase its client base of over 100 million by gaining access to a credit card network of 305 million cardholders with the acquisition of Discover Financials. Discover is among the four major credit card networks in the US alongside American Express, Master Card and Visa.
Capital One, based in McLean, Virginia, would pay 1.0192 of its own shares for each Discover share, the company said in a statement. This represents a 26.6% premium over the closing price on February 16. After receiving regulatory and shareholder clearance from both companies, the deal—initially announced by Bloomberg News—is anticipated to close in late 2024 or early 2025.
This year, the acquisition of Discover has surpassed Synopsys Inc.’s $34 billion acquisition of software firm Ansys Inc., which was announced in January, as the largest merger in the world. According to statistics collated by Bloomberg Intelligence, the acquisition unites two legendary consumer finance companies, a combination that would eclipse longstanding competitors JPMorgan Chase & Co. and Citigroup Inc. by US credit-card lending volume.
According to Capital One CEO Richard Fairbank, it is a “singular opportunity” to combine two businesses that can rival the biggest payment networks.
The acquisition was followed by an unstable period for Discover, during which Roger Hochschild, the company’s former CEO, resigned in August last year after a regulatory investigation into several credit accounts that had been mistakenly categorised. Michael Rhodes was named the business’s new CEO in December and the company revealed a 62% decline in fourth-quarter profits.
Consumer activists objected to the proposed agreement, claiming that it would violate antitrust laws. Jesse Van Tol, CEO of the National Community Reinvestment Coalition, stated in a statement, “It is very difficult to imagine how federal regulators could allow Capital One to buy Discover given the requirement that mergers benefit the public as well as insiders.“
