Capital One To Acquire Discover: What You Need To Know

In a major banking industry shakeup, Capital One announced that it would acquire Discover Financial Services. This announcement means that Capital One’s current volume in the credit card market will experience a significant boost.

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 major acquisition.

Details of Capital One’s Acquisition of Discover

Capital One has 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 announced Monday evening, February 19, 2024, Discover (DFS) stockholders would get slightly more than 1 Capital One (COF) share for every Discover share they possess. That is a nearly 27% increase over Discover’s closing share price of $110.49 on Friday, February 16, 2024.

At close, Capital One shareholders will own approximately 60% and Discover shareholders will own approximately 40% of the combined company.

“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.

After the acquisition is finalized, likely in late 2024 or early 2025, 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.

Final Thoughts

The acquisition of Discover Financial Services by Capital One is poised to significantly influence the credit card market and banking industry overall. This news is 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.