Capital One Buys Discover

( – Financial giant Capital One is set to buy credit card company Discover Financial Services (DFS) in an all-stock deal valued at $35.3 billion.

The deal is far from done, and is in the preliminary stages that include due diligence efforts from both parties. The deal is also still subject to regulatory approval.

The terms of the proposed transaction indicate that shareholders of DFS will receive one Capital One share for each Discover share they own. The current value of Capital One shares represents around a 27% premium over the value of Discover’s shares, which closed at $110.49 at market close on February 16. As of close of markets on Tuesday, February 20, DFS share price jumped to $124.42 apiece. If the deal does close, Capital One shareholders will own a total of 60% of the combined company, while the remaining 40% will owned by former Discover shareholders.

For 2023, data released by the Nilson Report put Capital One as the fourth-largest credit card issuer in America, while Discover was sixth. Outstanding receivable payments for Capital One and Discover were $122.9 billion and $94 billion, respectively.

The transaction is set to close late this year or early next year.

Observers point out that Capital One may switch to using the Discover payments network if it does indeed acquire DFS – Capital One currently has cards that both use the Visa and Mastercard networks. Consumer advocates say that if government regulators approve the deal and it pushes through, consumers could see less competition among credit card companies, which would likely lead to higher fees.

Democratic Massachusetts Senator Elizabeth Warren, who chairs the Senate Banking Subcommittee, said that the merger between Discover and Capital One is a threat to the financial stability of everyday Americans.

“This Wall Street deal is dangerous and will harm working people,” the Massachusetts senator tweeted.

Warren has also called on regulators to nix the deal.

Copyright 2024,