Capital One snags Discover Financial in major financial acquisition.

Capital One announced its plans to purchase Discover Financial Services for more than $35 billion in an all-stock deal, offering Discover shareholders 1.0192 Capital One shares for each Discover share. This represents a 27% premium based on Discover’s closing price. With Capital One shareholders set to own 60% of the combined company, the deal will give Capital One access to Discover’s network, boosting its presence in the payments ecosystem.

The acquisition comes at a time when the credit-card sector is thriving, with an increasing number of consumers switching from cash to cards, driven by rewards programs and the digitalization of commerce. By acquiring Discover, Capital One aims to leverage its network to negotiate interchange fees directly with merchants, competing with major players like Visa and Mastercard.

Discover, which faced regulatory scrutiny and a change in leadership, will bring its high credit-score cardholders and consumer deposits – mainly in savings accounts – to Capital One. The deal not only expands Capital One’s customer base but also strengthens its foothold in the credit-card lending business amidst rising credit-card usage and attractive interest charges.

With M&A activity rebounding in 2024, the acquisition of Discover ranks among the biggest deals of the year so far. The consolidation of Capital One and Discover signifies a strategic move in the competitive credit-card industry, signaling potential growth opportunities and enhanced market presence for Capital One.