With the announcement that it will acquire Discover Financial Services for $35.3 billion in
all-stock terms, Capital One will have an advantage over other banks in the credit card
industry
Discover stockholders would receive 1.0192 Capital One shares for every Discover share
under the terms of the agreement, or around 26% more than Discover’s Friday closing price
of $110.49. The firms stated that they anticipate the acquisition closing in late 2024 or early
2025, at which point shareholders of Capital One would own 60% of the merged company
and shareholders of Discover would own 40%.
“Discover has been more successful in attracting large deposits and has established
connections with numerous institutions to manage the debit card network and offer services.”
Thus, it provides them with a great deal of deposit gathering capacity, which is quite crucial,
especially in the current market, according to David Schiff, head of consumer retail and
banking at West Monroe.
In the announcement on Monday, Capital One’s founder and CEO, Richard Fairbank, stated
that the acquisition will “build a payments network that can compete with the largest
payments networks and payments companies.”
If authorities accept the union of Capital One and Discover, Capital One would also have
access to merchant fees as a new source of income.
Tuesday at 8:00 am ET, the firms will hold a joint conference call.