With the goal of “building a payments network that can compete with the largest networks” and payment firms all working together, the American financial institution is proposing to acquire Discover for $35.3 billion. The proposal is expected to be finished by the start of 2025 at the latest.
A big American bank, Capital One, said on Monday that it will acquire another financial services provider, Discover, for $35.3 billion. This would unite two of America’s most well-known credit card companies.
In a statement, Capital One’s founder and CEO Richard Fairbank said that the purchase of Discover will help build a payments network that can compete with the big networks and payment companies.
According to the terms of the transaction, for every share of Discover, stockholders will receive 1.0192 shares of Capital One. This is a 26.6% premium over the stock price of Discover as of February 16th, when the market closed. You can get it for $110.49.
Capital One stockholders would own about 60% of the combined company when the merger is consummated, which is anticipated to happen in late 2024 or early 2025. Discover shareholders will own around 40%.
Pursuing the objective of “Build a global payments company” is the strategy.
After American Express, Visa, and Mastercard, Discover is the fourth big worldwide credit card network based in the United States. More than 70 million businesses in over 200 countries accept its payment options.
An official statement from the group states that the merger represents “an essential starting point in Capital One’s quest to build a global payments company.”
Micheal Rhodes, CEO of Discover, said that Capital One’s purchase “will accelerate growth and maximize value for our shareholders, allowing them to participate in the tremendous growth of the combined company.”
“This acquisition adds scale and investment, enabling the Discover network to be more competitive with the largest payments networks,” according to a statement from the companies. “This acquisition also adds investment.”
As a premium of 26.6% over Friday’s market price, owners of Discover will get 1.0192 Capital One shares for every share of Discover.
Once the deal closes, Discover shareholders will own 40% of the combined company and Capital One stockholders would own 60%.
According to a report given to clients by Baird equities research analysts, a merger between Capital One and Discover would be highly beneficial conceptually and practically. Capital One credit cards could benefit from utilizing Discover’s network, and the analysts mentioned the possibility of cost reductions due to increased size.