Capital One to buy Discover for $35 billion in 2024 in largest transaction ever

New York (CNN) — Capital One acquired Discover Financial Services for $35.3 billion in an all-stock deal that will give the bank an advantage in the competitive credit card market.

Under the terms of the deal announced Monday night, Discover shareholders will receive just one share of Capital One for each Discover share they own. This represents a premium of about 27% over Discover’s closing stock price, which was $110.49 on Friday.

If the deal goes through, existing Capital One shareholders will own a 60% stake in the combined company, while Discover shareholders will own the remaining 40%.

Capital One believes the deal will close in late 2024 or early 2025.

With a market valuation of about $28 billion, Discover is much smaller than the other three big US credit card networks: Visa, MasterCard and American Express. Credit card networks are the link between card issuers and the merchants for which they set fees.

Integrating Discover, which also issues its own credit cards, would give the bank a big advantage over other credit card-issuing banks like JPMorgan Chase, Bank of America and Citigroup, similar to Capital One, which don’t process them. Are. The transaction itself.

Capital One founder and CEO Richard Fairbank said in Monday’s announcement that the deal will “build a payments network that can compete with the largest payment networks and companies.”

The marriage between Capital One and Discover, if approved by regulators, would also give Capital One a new source of revenue from fees charged to merchants.

Capital One currently issues credit cards with MasterCard and Visa. It said the deal would likely move more of its cards to the Discover network wall street journal Ahead of the deal’s official announcement this Monday.