Capital One to Acquire Discover Financial Services in $35.3 Billion Deal
In a bold move to create a global payments giant, U.S. consumer bank Capital One, backed by Warren Buffett, has announced its plans to acquire U.S. credit card issuer Discover Financial Services in an all-stock transaction valued at $35.3 billion. This strategic move aims to position the combined entity as the sixth-largest U.S. bank by assets and a formidable player in the credit card market, competing with industry giants like JPMorgan Chase and Citigroup. The acquisition would make Capital One the largest U.S. credit card company by loan volume, leveraging Discover's extensive network of 305 million cardholders.
The deal, which offers Discover shareholders a 26.6% premium over the closing price on Friday, is expected to grant the new entity significant scale and investment. According to a statement by the companies, the acquisition aims to make the Discover network more competitive globally, with expectations to achieve $2.7 billion in pre-tax synergies by 2027 through cost-cutting and network savings.
However, the transaction is likely to face intense regulatory scrutiny, especially considering President Joe Biden's administration's focus on promoting competition in the economy. The deal is slated for regulatory approval in late 2024 or early 2025, marking a significant test for bank merger regulation under the Biden administration's push for increased competition.
