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Capital
One
Financial
is
set
to
acquire
Discover
Financial
Services
in
a
$35.3
billion
all-stock
deal.
Under
the
agreement,
Discover
shareholders
would
receive
1.0192
Capital
One
shares
for
each
Discover
share
or
about
a
26%
premium
from
Discover’s
Friday
closing
price
of
$110.49.
The
companies
said
they
expect
the
deal
to
close
in
late
2024
or
early
2025,
after
which
Capital
One
shareholders
would
hold
60%
and
Discover
shareholders
would
own
40%
of
the
combined
company.
The
merger
of
the
two
companies,
which
are
among
the
largest
credit
card
issuers
in
the
U.S.,
would
expand
Capital
One’s
credit
card
offerings
and
its
deposit
base.
The
company
bought
digital
concierge
service
Velocity
Black,
a
premium
credit
card
and
luxury
market
platform,
in
June
of
last
year.
The
Wall
Street
Journal
reported
that
Capital
One,
which
already
uses
Visa
and
Mastercard
networks,
plans
to
keep
the
Discover
brand.
“Discover
has
done
a
better
job
of
bringing
in
a
lot
of
deposits
and
[has]
access
to
a
lot
of
institutions
to
run
the
debit
card
network
and
provide
service.
So
it
gives
them
a
lot
of
deposit
gathering
ability,
which
particularly
in
the
current
market
is
enormously
important,”
said
David
Schiff,
West
Monroe’s
head
of
consumer
retail
and
banking.
CNBC
has
reached
out
for
comment
from
both
Capital
One
and
Discover.
There
aren’t
many
parallels
for
similar
acquisitions
in
the
financial
industry,
meaning
that
the
Capital
One-Discover
deal
will
likely
have
broad
implications
for
merger
activity
within
the
sector,
said
Schiff.
“It’s
a
good
example
of
the
risk
we’re
seeing
in
the
market,
where
the
competing
interests
from
regulators
for
increased
control
and
rigor
balance
against
the
competitive
demands
that
are
being
made
quite
clearly,
in
terms
of
the
overall
market,”
Schiff
said.
The
deal
comes
amid
a
period
of
increasing
pressure
for
Discover,
including
regulatory
scrutiny
and
new
leadership.
The
current
CEO
Michael
Rhodes
was
announced
in
December
2023.
Shares
of
Discover
are
down
1.7%
lower
for
the
year,
putting
the
company
at
a
$27.63
billion
market
cap.
Capital
One
has
a
market
cap
of
$52.2
billion
and
shares
of
the
company
are
up
4.6%
in
2024.
Bloomberg
News
reported
on
Monday
that
Capital
One
was
considering
the
Discover
acquisition.
The
Capital
One-Discover
merger
would
be
one
of
the
largest
deals
announced
so
far
this
year.
Synopsys
announced
a
deal
to
buy
Ansys
for
$35
billion
in
January
and
Diamondback
Energy‘s
$26
billion
deal
to
buy
privately
held
oil
and
gas
producer
Endeavor
Energy
was
announced
on
Feb.
12.
