Capital One Acquires Discover Financial Services in $35.3 Billion Deal - A Game-Changer for the Credit Card Market

February 20, 2024 - Reading time: 2 minutes

Under the terms of this deal, which was officially announced on Monday evening, Discover (DFS) shareholders will receive one share of Capital One (COF) for every Discover share they own.

This represents a premium of almost 27% from Discover's closing share price of $110.49 on Friday.

If the deal is finalized, current Capital One shareholders will own a 60% stake in the combined company, while Discover shareholders will own the remaining 40%. The acquisition is expected to close sometime between late 2024 and early 2025.

With a market valuation of nearly $28 billion, Discover is considerably smaller than its competitors in the US credit card networks - Visa (V), Mastercard (MA) and American Express (AXP).

The acquisition will give Capital One a significant advantage over competing credit card-issuing banks such as JPMorgan Chase (JPM), Bank of America (BAC), and Citigroup (C), which do not process transactions themselves.

Richard Fairbank, the founder and CEO of Capital One, said in his announcement that this deal would "build a payments network that can compete with the largest payment networks and payment companies."

If approved by regulators, this merger between Capital One and Discover will also provide Capital One with a new source of revenue from merchant fees it collects.

Currently, Capital One issues credit cards in partnership with Mastercard, Visa, and Discover. The deal is expected to result in more of its cards being switched over to the Discover network, as reported by the Wall Street Journal earlier on Monday before the official announcement was made.

The companies are hosting a joint conference call on Tuesday morning at 8:00 am ET. This story has been updated with additional details.

DW Staff

David Lintott is the Editor-in-Chief, leading our team of talented freelance journalists. He specializes in covering culture, sport, and society. Originally from the decaying seaside town of Eastbourne, he attributes his insightful world-weariness to his roots in this unique setting.