US Markets
Tuesday, February 20th, 2024 5:16 pm EDT
Key Points
- Acquisition Details: Capital One Financial is set to acquire Discover Financial Services in a $35.3 billion all-stock deal. Under the agreement, Discover shareholders will receive 1.0192 Capital One shares for each Discover share, representing a premium of about 26% from Discover’s Friday closing price of $110.49. The deal is expected to close in late 2024 or early 2025, with Capital One shareholders holding 60% and Discover shareholders owning 40% of the combined company.
- Strategic Implications: The merger between Capital One and Discover, two major credit card issuers in the U.S., aims to expand Capital One’s credit card offerings and deposit base. While Capital One already utilizes Visa and Mastercard networks, it plans to retain the Discover brand, leveraging Discover’s strengths in deposit accumulation and debit card network services. This strategic move is significant in the financial industry and is expected to have broad implications for merger activity within the sector, with limited parallels for similar acquisitions.
- Market Dynamics and Context: The deal comes amidst increasing pressure on Discover, including regulatory scrutiny and recent leadership changes. Despite Discover’s shares experiencing a 1.7% decline for the year and Capital One’s shares witnessing a 4.6% increase in 2024, Bloomberg News reported Capital One’s interest in acquiring Discover, making it one of the largest deals announced in the year. This acquisition joins other notable deals, such as Synopsys’ acquisition of Ansys for $35 billion in January and Diamondback Energy’s $26 billion deal with Endeavor Energy announced in February.
Capital One Financial has unveiled plans to acquire Discover Financial Services in an all-stock deal valued at $35.3 billion. This agreement offers Discover shareholders 1.0192 Capital One shares for each Discover share, representing a significant premium of about 26% from Discover’s closing price of $110.49 on Friday. The merger, expected to finalize in late 2024 or early 2025, will result in Capital One shareholders owning 60% and Discover shareholders holding 40% of the combined company. This strategic move aims to expand Capital One’s credit card offerings and deposit base, bolstered by Discover’s strengths in deposit gathering and debit card network services. Despite Capital One’s existing partnerships with Visa and Mastercard networks, the company reportedly plans to retain the Discover brand. David Schiff, West Monroe’s head of consumer retail and banking, highlighted Discover’s prowess in deposit accumulation, particularly valuable in the current market landscape. The proposed acquisition, with limited parallels in the financial industry, is expected to have significant implications for merger activities within the sector. Schiff noted the balancing act between regulatory control and competitive market demands as a key consideration in such deals. Discover faces increasing pressure, including regulatory scrutiny and recent leadership changes, with CEO Michael Rhodes appointed in December 2023. While Discover’s shares have experienced a 1.7% decline for the year, Capital One’s market cap stands at $52.2 billion, with shares up 4.6% in 2024. Bloomberg News previously reported Capital One’s interest in acquiring Discover, making this merger one of the largest deals of the year, alongside Synopsys’ $35 billion acquisition of Ansys and Diamondback Energy’s $26 billion deal with Endeavor Energy announced earlier in January and February, respectively.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/02/19/capital-one-acquiring-discover-financial-services-report-says.html
