Capital One Financial Corporation and Discover Financial Services 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.
The deal is subject to regulatory and shareholder approval. Capital One is headquartered in northern Virginia, with Discover based in a Chicago suburb. Capital One is a hybrid bank with branches, credit cards, and online banking operations. Discover is primarily a credit card issuer with its own brand. Capital One is the nation’s ninth-largest bank, ranking ahead of TD.
Both companies have operations in Delaware. Discover was one of the first credit card companies to enter the state. Capital One entered the market by purchasing Wilmington-based ING Direct over a decade ago.
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 closing, Capital One shareholders will own about 60%, and Discover shareholders will own approximately 40% of the combined company.
“From Capital One’s founding days, we set out to build a payments and banking company powered by modern technology. 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,” said Richard Fairbank, founder and CEO of Capital One. “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.”
“The transaction with Capital One brings together two strong brands with enhanced ability to accelerate growth and maximizes value for our shareholders, enabling them to participate in the tremendous upside of the combined company,” said Michael Rhodes, CEO of Discover. “This agreement underscores the strength of our business and is a testament to the hard work of Discover employees. We look forward to a bright future as part of the Capital One family and to providing expanded opportunities for our loyal customers.” Rhodes, a former MBNA, TD, and Bank of America, became Discover’s CEO this month.
Capital One cited Discover’s global payments network as a driving force behind the acquisition. Also cited was the synergies of the credit cards offered by the two companies.
Capital One also cited its “Digital First” bank with brick-and-mortar branches and an online operation that grew out of ING Direct. Discover also operates a direct savings bank.
Capital One said the acquisition would be able to produce expense synergies of $1.5 billion. Typically, the term means combining operations and reducing staff.
The transaction is expected to close in late 2024 or early 2025, subject to satisfaction of customary closing conditions, including regulatory approvals and approval by the shareholders of each company.
