Capital One Financial Corporation (NYSE: COF) and Discover Financial Services announced that they have entered into a definitive agreement under which Capital One will acquire Discover in an all-stock transaction valued at $35.3 billion.
The transaction brings together two companies “with track records of delivering …resilient financial results, … customer experiences, innovation, and financial inclusion.”
Under the terms of the agreement, Discover shareholders will “receive 1.0192 Capital One shares for each Discover share, representing a premium of 26.6% based on Discover’s closing price of $110.49 on February 16, 2024.”
At close, Capital One shareholders will “own approximately 60% and Discover shareholders will own approximately 40% of the combined company.”
Richard Fairbank, founder, Chairman and Chief Executive Officer of Capital One, said:
“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. 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.”
Michael Rhodes, CEO and President of Discover, said:
“The transaction with Capital One brings together two strong brands with enhanced ability to accelerate growth and maximizes value for our shareholders, enabling them to participate in the tremendous upside of the combined company. This agreement underscores the strength of our business and is a testament to the hard work of Discover employees. We look forward to a bright future as part of the Capital One family and to providing expanded opportunities for our loyal customers.”
As noted in the update, Discover claims that it has “built a rare and valuable global payments network with 70 million merchant acceptance points in more than 200 countries and territories.”
Even so, it is the smallest of the four US-based global payments networks.
This acquisition adds scale and investment, “enabling the Discover network to be more competitive with the largest payments networks and payments companies.”
This is a key foundation in Capital One’s quest to build a global payments company. It will accelerate the company’s long-standing journey to work directly with merchants to leverage its customer base, technology, and data ecosystem to drive more sales for the merchant and great deals for consumers and small businesses.
Capital One and Discover claim that they “are proven credit card franchises with complementary strategies and a shared focus on the customer.”
Both companies says that they “have developed compelling flagship products, award-winning customer experiences, and powerful brands.”
They have also both reportedly “delivered attractive and resilient growth and returns through economic cycles.”
The combined credit card business will “be in an even stronger position to deliver industry-leading products and experiences that span the credit card marketplace across consumers, small businesses, and merchants.”