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(Bloomberg) — Capital One Financial Corp. has agreed to acquire credit card lender Discover Financial Services in a $35 billion all-stock deal, creating the largest U.S. credit card company by loan value. .
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McLean, Virginia-based Capital One will pay 1.0192 shares of its own stock for each Discover share, representing a 26.6% premium over the Feb. 16 closing price, the company said in a statement. Ta. The transaction is expected to close in late 2024 or early 2025.
The partnership brings together two prestigious consumer finance brands, and the combination will surpass longtime rivals JPMorgan Chase & Co. and Citigroup Inc. in U.S. credit card loan volume, according to data compiled by Bloomberg Intelligence. It turns out.
Capital One holders will own approximately 60% of the combined company, and Discover holders will own approximately 40%, according to the statement. The acquisition will generate pre-tax synergies of $2.7 billion.
The Discover deal ranks among the world’s biggest acquisitions this year, according to data compiled by Bloomberg. The biggest deal to date was Synopsys’ acquisition of software developer Ansys for about $34 billion, announced in January.
prime customer
Capital One is known for its commercials in which celebrities such as Jennifer Garner and Samuel L. Jackson ask, “What’s in your wallet?” The company, led by 73-year-old CEO Richard Fairbank, has traditionally catered to subprime consumers who carry balances on their cards every month.
In recent years, Capital One has sought to attract more premium customers, who tend to spend more and be more loyal. Last year, the company agreed to acquire digital concierge service Velocity Black, moving deeper into the luxury goods market dominated by American Express and JPMorgan.
Discover has long focused on prime customers with better credit ratings, but has historically eschewed the flashy sign-on bonuses and lavish perks used by many rivals.
Capital One is pursuing the acquisition after Discover shares fell sharply in the second half of last year after the company warned it had discovered several compliance deficiencies. was. The issue ultimately led to the resignation of then-CEO Roger Hochschild.
In January, Discover announced a 62% drop in fourth-quarter profit as the company continued to deal with the impact. The company suspended stock buybacks last year and is looking for a buyer for its student loan business. Discover appointed Toronto-Dominion Bank’s Michael Rose as its new CEO in December, and he is expected to take over by early March.
–With assistance from Jenny Surane.
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