The transaction creates a global payments platform at scale, with 70 million merchant acceptance points in more than 200 countries and territories. The combined company will compete with the largest payments companies and deliver enhanced value to a franchise of over 100 million customers. The deal, which is expected to receive intense antitrust scrutiny, would form the sixth-largest U.S. bank by assets.
Capital One Financial Corporation 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.
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.
The purchase of Discover ranks as the biggest merger globally this year, surpassing Synopsys Inc.’s roughly $34 billion acquisition of software developer Ansys Inc. announced in January. It brings together two storied consumer-finance brands, a combination that will surpass rivals JPMorgan Chase & Co. and Citigroup Inc. by US credit-card loan volume, according to data compiled by Bloomberg Intelligence. The deal will also give Capital One a foothold in the world of payment networks.
„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,” said Richard Fairbank, founder, Chairman and Chief Executive Officer of Capital One. „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.”
„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,” said Michael Rhodes, CEO and President of Discover. „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.”
Financial results
The transaction is expected to generate expense synergies of $1.5 billion in 2027 (26% of Discover operating expenses, plus 10% of Discover marketing expenses), driven by common business functions partially offset by targeted investments in the Discover 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.
The deal is expected to be more than 15% accretive to adjusted non-GAAP EPS in 2027.
The transaction is expected to deliver return on invested capital of 16% in 2027, with an internal rate of return in excess of 20%.
The transaction is expected to close in late 2024 or early 2025, subject to satisfaction of customary closing conditions, including regulatory approvals and approval by the shareholders of each company.
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Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
