Capital One Financial (COF) is buying rival Discover Financial Services (DFS) in a $35.30 billion U.S. all-stock deal as it seeks to expand its credit card offerings.
Under terms of the agreement, Discover shareholders will receive 1.0192 Capital One shares for each Discover share they own, representing a 26% premium from Discover’s closing stock price of $110.49 U.S. per share on Feb. 16.
The companies said they expect the deal to close by early 2025, after which Capital One shareholders will own 60% of the combined company while Discover shareholders will own the remaining 40%.
The merger of the two companies, which are among the largest credit card issuers in America, will further expand Capital One’s credit card offerings and its deposit base.
Media reports say that Capital One plans to keep the Discover brand after the deal is finalized.
The acquisition comes as Discover Financial transitions to a new leadership team under recently installed chief executive officer (CEO) Michael Rhodes.
Shares of Discover are down 1.7% on the year, giving the company a $27.63 billion U.S. market capitalization. In pre-market trading today (Feb. 20), the stock is up 14% and trading at $125.79 U.S. per share.
Capital One has a market cap of $52.20 billion U.S. and shares of the company are up 4% so far in 2024. Its stock is down 6% in pre-market trading at $128.75 U.S. per share.
