Capital One Receives Approval To Acquire Discover: What You Need To Know

Updated: December 19, 2024, 12:08pm CST

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Details of Capital One’s Acquisition of Discover
Final Thoughts

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Capital One received approval yesterday, December 18, from the Office of the Delaware State Bank Commissioner to finalize its previously announced acquisition of Discover in February of this year.

In a major banking industry shakeup, Capital One announced in February 2024 that it would acquire Discover Financial Services. This theoretically meant that Capital One’s current volume in the credit card market would experience a significant boost — and that’s a step closer to happening now.

In addition, the acquisition will introduce a variety of changes to Capital One’s card portfolio, solidifying its position as a key player in the credit card industry.

Let’s dive into the details of this important acquisition update.

Details of Capital One’s Acquisition of Discover

On February 19, 2024, Capital One agreed to purchase Discover Financial Services (DFS) in an all-stock deal valued at $35.3 billion, forming a payments behemoth with over 100 million customers that will compete directly with Visa, Mastercard, and American Express.

Under the terms of the agreement, Discover (DFS) stockholders would get slightly more than 1 Capital One (COF) share for every Discover share they possess. That was nearly a 27% increase over Discover’s closing share price of $110.49 back on Friday, February 16, 2024.

When the acquisition is completed, Capital One shareholders will own approximately 60%, and Discover shareholders will own approximately 40% of the combined company.

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“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 chief executive officer of Capital One.

Capital One anticipates that the transaction will close in early 2025, subject to the satisfaction of the remaining closing conditions outlined in the merger agreement between the companies. Conditions include approval by Discover and Capital One stockholders, as well as approval by the Board of Governors of the Federal Reserve System and the Office of the Comptroller of Currency. Capital One also will maintain Discover’s branch in Sussex County, Delaware.

After the acquisition is finalized, Capital One is anticipated to retain the Discover brand and transition some of its issued cards to the Discover network.

Here’s what else we know about the acquisition:

The acquisition will establish a global payments platform with 70 million merchant acceptance locations across more than 200 countries and territories. This development is significant considering that historically, Discover has not been as widely accepted globally as Visa, Mastercard, and American Express.
Capital One will scale and leverage the benefits of an 11-year technology transformation across all of Discover’s businesses and the network.
The acquisition is expected to generate network synergies of $1.2 billion in 2027, driven by adding Capital One debit purchase volume and selected credit card purchase volume to the Discover network.
Adding Discover’s national direct savings bank will increase the combined company’s scale to compete with the nation’s largest banks.
The deal will make both banks’ already great customer service even better. Together, they will be the only big banks with no fees, minimums, or overdraft fees, strengthening their positions further.

Bottom Line:

Capital One’s acquisition of Discover is expected to be finalized in early 2025. This action is expected to enhance the reputation of the participating financial institutions as the only large bank without fees, minimums, or overdraft charges, thereby strengthening their authority even more.

Final Thoughts

Once Capital One’s acquisition of Discover Financial Services is completed in early 2025, it will have a substantial impact on the credit card market and the banking industry as a whole. Although the impact of this acquisition on existing Capital One and Discover cardholders remains unclear, we can expect to gain more insights in the upcoming months.

However, this news is likely great for consumers, as it will lead to increased competition and more chances for consumers to benefit from credit card rewards in the future.

We will continue to provide updates on developments between Capital One and Discover as more information becomes available. Be sure to check back for the latest details.