Capital One has announced its acquisition of Discover Financial Services in a landmark, all-stock transaction valued at $35.3 billion, as disclosed on Monday.
In this deal, Capital One shareholders are slated to possess 60% ownership of the merged entity, while Discover shareholders will hold 40%.
Capital One’s chairman and CEO, Richard Fairbank, expressed enthusiasm for the acquisition, citing it as a unique opportunity to merge two highly successful companies with complementary strengths. He emphasized that the consolidation would enable the combined company to establish a robust payments network capable of competing with major players in the industry. Fairbank highlighted the potential for the newly formed entity to enhance its payments network and offerings, positioning it as a formidable competitor alongside leading global payment networks like Visa, Mastercard, and American Express.
The announcement shed light on Discover’s extensive payments network, boasting 70 million merchant acceptance points across over 200 countries and territories. Despite its global presence, Discover’s network is regarded as the smallest among the four prominent U.S.-based payment networks. Capital One’s acquisition aims to bolster Discover’s capabilities by infusing additional resources and investment, thereby fostering greater competitiveness within the payments industry.
While the acquisition signals a significant milestone for both companies, the transaction is subject to customary closing conditions, including regulatory approvals and approval by the shareholders of each company. Capital One anticipates finalizing the deal by late 2024 or early 2025.
Upon completion of the acquisition, three board members from Discover will be appointed to the Capital One board of directors, further integrating the two entities. Discover’s CEO and president, Michael Rhodes, expressed confidence in the agreement, emphasizing the strength of Discover’s business and the dedication of its employees. Rhodes conveyed optimism about the future prospects of Discover as part of the Capital One family, envisioning expanded opportunities for their loyal customers.
Overall, the acquisition of Discover by Capital One represents a strategic move aimed at leveraging synergies and enhancing competitiveness in the dynamic payments landscape. The combined entity is poised to unlock new growth opportunities, drive innovation, and deliver enhanced value to customers in the evolving financial services industry.