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Discover's payment network is used by more than 305 million cardholders.
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CNN
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Capital One announced it would acquire Discover Financial Services for $35.3 billion in an all-stock deal, giving it an edge in the competitive credit card market.
Under the terms of the deal announced Monday night, Discover (DFS) shareholders will receive just over one Capital One (COF) share for every Discover share they own. This represents a nearly 27% premium to Discover's closing share price of $110.49 on Friday.
If the deal goes through, Capital One's current shareholders will own 60% of the combined company, and Discover shareholders will own the remaining 40%.
Capital One said it expects the transaction to close in late 2024 or early 2025.
Discover's market valuation is approximately $28 billion, which is significantly smaller than the other three major U.S. credit card networks: Visa (V), Mastercard (MA), and American Express (AXP). Credit card networks act as intermediaries between card issuers and merchants and set fees.
The addition of Discover, which also issues its own credit cards, under the same roof as Capital One will give the bank an edge over competitors such as JPMorgan Chase (JPM), Bank of America (BAC), and Citigroup. (C) It does not process the transaction itself, giving it a significant advantage over credit card issuing banks.
Capital One founder and CEO Richard Fairbank said in an announcement Monday that the partnership will “build a payments network that can compete with the largest payment networks and payment companies.” Ta.
If the Capital One-Discover merger is approved by regulators, Capital One would also have a new source of revenue from the merchant fees it collects.
Currently, Capital One issues Mastercard, Visa, and Discover credit cards. The partnership will likely result in more cards being switched to the Discover network, The Wall Street Journal reported on Monday, before the partnership was officially announced.
The companies will hold a joint conference call Tuesday morning at 8 a.m. ET.
This story has been updated with additional details.
