Capital One is set to acquire Discover Financial Services for $35.3 billion in an all-stock deal, marking the biggest deal recorded so far in 2024.
The deal, announced late Monday, would see Discover shareholders receive 1.0192 Capital One shares for each Discover share. This amounts to about a 26% premium based on Discover's Friday closing price of $110.49.
If the deal is finalized, Capital One shareholders will own a 60% stake in the merger, while Discover shareholders will own 40%. Capital One said it believes the deal will close in late 2014 or early 2015.
What the Merger Means for Capital One
The merger of Capital One and Discover, which are among the largest credit card issuers in the country, would give the former a new source of revenue. This is because Discover, which also functions as a payment network, could give Capital One access to infrastructure that allows it to facilitate payments between merchants and card issuers when customers make a purchase. It would also allow Capital One to collect the fees charged in the said transactions, per Fortune.
If the deal is approved by regulators, it could give Capital One the leg up against other major credit card issuers, including JPMorgan Chase and Bank of America, which do not process payments on their own.
"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," Richard Chairban-founder, chairman, and chief executive officer of Capital One, said in a statement.
"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," he continued.
Currently, Capital One issues credit cards with Mastercard and Visa. The Wall Street Journal reported that Capital One plans to keep the Discover brand after the merger.
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