Capital One to Acquire Discover in $35B Mega-Merger

Facts

• Capital One Financial has reached an agreement to acquire Discover Financial Services in a $35.3B deal that merges two of the largest credit card companies in the US.¹
• The Wall Street Journal first reported the deal, which will give Discover shareholders 1.0192 Capital One shares for every Discover share - a premium of about 27% based on Discover's $110.49 closing price Friday.²
• The deal will likely take a year to be finalized, and the companies said they expect the deal to close in late 2024 or early 2025. Once complete, Capital One shareholders will hold a 60% stake in the combined company with current Discover investors holding the remaining 40%.³
• The pending agreement is the largest global merger this year, beating out Synopsys Inc.'s $34B buy of software developer Ansys Inc. Additionally, the newly combined company will pass JPMorgan Chase & Co. and Citigroup Inc. as the largest credit card company by loan volume.⁴
• Regulators are expected to heavily scrutinize the agreement, and approval is not a foregone conclusion. The Biden administration has challenged several high-profile mergers and was successful in court last month when a judge nixed a deal for JetBlue to acquire Spirit Airlines.⁵

Sources: ¹NPR Online News, ²Business Insider, ³CNBC, ⁴Bloomberg and ⁵Yahoo Finance.

Narratives

• Narrative A, as provided by Fortune. The merger between Capital One and Discover is yet another victory for the US's largest banks and lenders and another loss for consumers and competition. As millions of Americans drown in credit card debt, the leaders of two industry giants struck a deal that will only grow their wealth and stranglehold on the US economy. Perhaps regulators will intervene and stop this megacompany from forming, but it's tough to rein in these corporations that have captured so many people.
• Narrative B, as provided by Bloomberg. Companies have an obligation to deliver profits for their shareholders, and large mergers and acquisitions have been a core part of the American economy for years. Both Capital One and Discover reached a beneficial agreement that will help their shareholders and customers and allow them to offer enhanced services. It's also important to remember that both of these companies have been dealing with inflation and other economic troubles over the past few years, so this deal is very important on many grounds.