Major Business News: Capital One to Acquire Discover in $35 Billion Deal

TFD – Get the scoop on one of the biggest business agreements of the year as Capital One announces its acquisition of Discover in a $35 billion deal.

In an all-stock agreement valued at $35.3 billion, Capital One Financial is expected to purchase Discover Financial Services.

Discover stockholders would receive 1.0192 Capital One shares for every Discover share under the terms of the agreement, or around 26% more than Discover’s Friday closing price of $110.49. The firms stated that they anticipate the acquisition closing in late 2024 or early 2025, at which point shareholders of Capital One would own 60% of the merged company and shareholders of Discover would own 40%.

Capital One’s credit card products and deposit base would be expanded through the combination of the two corporations, which rank among the biggest credit card issuers in the United States. In June of last year, the business acquired the digital concierge service Velocity Black, a high-end credit card and luxury market platform.

Capital One, which now uses the networks for Visa and Mastercard, intends to maintain the Discover name, according to a report from The Wall Street Journal.

“Discover has been more successful in attracting large deposits and has established connections with numerous institutions to manage the debit card network and offer services.” Thus, it provides them with a great deal of deposit gathering capacity, which is quite crucial, especially in the current market, according to David Schiff, head of consumer retail and banking at West Monroe.

CNBC has requested comments from Discover and Capital One.

Since comparable acquisitions in the financial sector are rare, Schiff predicted that the Capital One-Discover agreement will have a significant impact on merger activity in the industry as a whole.

The competing interests of regulators for more control and rigor balance against the competitive demands that are being made pretty clearly, in terms of the overall market, Schiff said. “It’s a good example of the risk we’re seeing in the market.”

Discover is under increased pressure to close the purchase, particularly from new leadership and regulatory scrutiny. Michael Rhodes, the company’s current CEO, was introduced in December 2023.

With a 1.7% decline in shares for the year, Discover’s market valuation is now $27.63 billion. With a $52.2 billion market valuation, Capital One’s shares have increased 4.6% in 2024.

Capital One was reportedly exploring the Discover acquisition, according to a Monday Bloomberg News article.

One of the biggest agreements revealed this year will be the combination of Capital One and Discover. In January, Synopsys revealed plans to acquire Ansys for $35 billion, while on February 12, Diamondback Energy revealed plans to acquire privately held oil and gas producer Endeavor Energy for $26 billion.