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Capital One to acquire Discover for $35 billion

Capital One to acquire Discover for $35 billion

Capital One has made a $35 billion bid to acquire Discover Financial Services, in a move that radically reshapes the payment card industry.

The all-stock transaction unites two of the US leading credit card issuers, setting the stage for the creation of a payments network capable of competing on a global scale with the Mastercard/Visa duopoly.

Discover Financial shareholders are set to receive Capital One shares valued at nearly $140 each, signifying a substantial premium over recent closing prices.

The combined franchise comprises 70 million merchant acceptance points in more than 200 countries and territories serving 100 million customers.

The merger not only combines the vast customer bases of both companies but also integrates Discover’s payment processing network, offering an opportunity to challenge the dominance of existing networks. It also gives Discover’s payment network a major credit card partner in a way that could make the payment network a major competitor once again.

"Our acquisition of Discover is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payments companies,” says Richard Fairbank, founder, chairman and CEO of Capital One. “Through this combination, we’re creating a company that is exceptionally well-positioned to create significant value for consumers, small businesses, merchants, and shareholders as technology continues to transform the payments and banking marketplace.”

The transaction is expected to generate expense savings of $1.5 billion in 2027 (26% of Discover operating expenses, plus 10% of Discover marketing expenses), partially offset by targeted investments in the Discover network, alongside network synergies of $1.2 billion in 2027, driven by adding Capital One debit purchase volume and selected credit card purchase volume to the Discover network.

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