Capital One scales up significantly by acquiring Discover

Capital One Bank sign in a shop-front.
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Capital One Financial Corporation has entered into a definitive agreement under which it will acquire Discover in an all-stock transaction valued at $35.3bn.

Under the terms of the agreement, Discover shareholders will receive 1.0192 Capital One shares for each Discover share, which represents a premium of 26.6% based on Discover’s closing price of $110.49 that was set on 16 February 2024. 

Furthermore, at close Capital One shareholders will own approximately 60% and Discover shareholders will own approximately 40% of the combined company.

Michael Rhodes, CEO and President of Discover, stated: “The transaction with Capital One brings together two strong brands with enhanced ability to accelerate growth and maximises value for our shareholders, enabling them to participate in the tremendous upside of the combined company.”

Both financial companies hope to build a global competitive payments network. Discover has built a global payments network with 70 million merchant acceptance points in more than 200 territories, however it is still the smallest of the four US-based global payments networks.

Richard Fairbank, Founder, Chairman and Chief Executive Officer of Capital One, commented: “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.”

The acquisition will also allow the two companies to combine complimentary card services, with both having developed flagship products, aiming to build on Capital One’s founding mission to “build a payments and banking company powered by modern technology.”

Through working together, Capital One has said that the combined credit card business will put itself in an even stronger position to deliver industry-leading products and experiences for customers, merchants and small businesses.

Fairbank added: “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.”

Discover is set to benefit from Capital Bank’s leveraging of an eleven year technology transformation across all of Discover’s businesses and its network. 

In addition, the deal will allow Capital One to scale its “digital first” national bank by adding Discover’s fast-growing national direct savings bank, which will increase the combined company’s scale. Also, Discover’s network will accelerate national banking growth, allowing Capital One to compete with the nation’s largest banks. 

Rhodes concluded: “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.”

Last year, Discover partnered with Andaria to “revolutionise” the embedded finance space. Capital One hopes that its acquisition of Discover will allow it to do the same and become a powerhouse in its sector.