Capital One to Buy Discover for $35.3B in All-Stock Deal

Capital One has agreed to acquire Discover Financial Services in an all-stock transaction valued at $35.3 billion, creating the largest U.S. credit card company by loan volume.

Under the terms of the agreement, Discover Financial shareholders will receive 1.0192 shares of Capital One, reflecting a 26.6% premium over Discover’s closing price of $110.49 last Friday.

At the time of closing, which is projected in late 2024 or early 2025, Capital One shareholders would own around 60% of the merged company, while Discover stockholders will own 40%.

“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, chairman and CEO of Capital One.

Capital One, based in McLean, VA, anticipates the transaction to create $2.7 billion in pretax synergies and increase adjusted EPS by more than 15% in 2027. It is also anticipated to generate a 16% return on invested capital in 2027, with an internal rate of return greater than 20%.

Discover operates a global payment network with 70 million merchant acceptance points in over 200 countries and territories. Still, it is the smallest of the four U.S.-based global payment networks, which include American Express, Visa, and Mastercard.

The merger would create the sixth-largest bank in the U.S. in terms of assets, as well as a credit card juggernaut to compete with JPMorgan Chase and Citigroup.