Wedding of the year between the two main companies of credit cards Americans. The banking giant Capital One acquires financial services company discover. The operation is valid $35,3 billion in stock and joins the fourth and sixth largest credit card providers in the US, respectively. This is currently the largest and largest deal of the year globally.
Credit Cards: the details of the marriage between Capital One and Discover
The acquisition will take place through one share exchange. Under the terms of the agreement, Discover shareholders will receive 1,0192 Capital One shares for each Discover share, with a 26,6% bonus compared to Discover's closing price on Friday of $110,49.
Once the transaction closes, Capital One shareholders will own approximately 60% of the combined company, while Discover shareholders will own approximately 40%.
The operation will require the green light from the US antitrust and, according to Capital One forecasts, it should be completed between the end of 2024 and the beginning of 2025, leading to the birth of the sixth largest financial institution in the United States.
The transaction is expected to generate spending synergies for $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. Also estimate network synergies for $1,2 billion in 2027, led by the addition of Capital One debt purchase volume and select credit card purchase volume to the Discover network.
What Discover does
Discover operates in 200 countries is one of the largest credit card networks in the United States, but is smaller than the first three: Visa, Mastercard and American Express. The acquisition of the company “will accelerate growth and maximize value for our shareholders by allowing them to participate in the tremendous benefit of the combined company,” said Discover CEO Michael Rhodes.
For the founder and CEO of Capital One, Richard Fairbank, however, the wedding will help "build a payments network capable of compete with the biggest payment networks and companies”.
“The combined credit card businesses will be in an even stronger position to provide industry-leading products and experiences that span the credit card market to all consumers, small businesses and merchants,” Capital One concluded.
In Wall Street pre-market the Capital One stock lost 6%, while the Discover stock gained 11%, approaching the price of the operation.
