Capital One Financial has announced it is buying Discover Financial Services in a $35 billion, all-stock deal.
The Associated Press reported that Discover shareholders will get Capital One shares that are worth about $140 each, compared to the current value of Discover of $110.49.
The deal, according to the AP, will bring together two of the largest credit card companies that are not primarily banks. Both have similar customers: those looking for cash back or travel perks.
Capital One has $479 billion in assets and offers cards on both the Visa and Mastercard networks. The deal will bring an additional 305 million cardholders to the more than 100 million it already has, The New York Times reported.
It will also expand Discover’s reach in terms of where payments are accepted, with Visa and Mastercard neck-and-neck, American Express in third place and Discover in fourth.
It is not known if Capital One will take over Discover’s payment system or will have two running simultaneously.
“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,” Richard Fairbank, Capital One chairman and CEO, said in a statement.
The deal still needs to be approved by the federal government because it could break antitrust rules, the Times reported.
“It is very difficult to imagine how federal regulators could allow Capital One to buy Discover given the requirement that mergers benefit the public as well as insiders,” Jesse Van Tol, National Community Reinvestment Coalition’s chief executive, said in a statement to the newspaper.
The Office of the Comptroller of the Currency had said last month it wanted to slow down approvals of deals such as these.
If all goes as planned, the deal is expected to close in late 2024 or early 2025, CNN reported.
As of the fourth quarter of 2023, Americans have $1.13 trillion on their credit cards with no signs of stopping. While higher balances prevail, so do higher interest rates with the average coming in at about 21.5%, the highest since the Federal Reserve started keeping track in 1994, the AP reported.