Capital One Financial Corp. (COF.N) agreed to acquire credit card lender Discover Financial Services (DFS.N) in an all-stock deal worth $35 billion, creating the largest U.S. credit card company by loan volume.
Capital One Financial Corp. was the last financial stock bought by Buffett's Berkshire Hathaway so far.
McLean, Virginia-based Capital One will pay 1.0192 shares of its own stock for each Discover share, a 26.6% premium to the Feb. 16 closing price, the company said in a statement. The deal is expected to close in late 2024 or early 2025.
Data shows that the deal is the world's largest acquisition this year. The previous largest deal was Synopsys Inc.'s acquisition of software developer Ansys Inc. for about $34 billion announced in January.
Data compiled by foreign media also show that the deal brings together two well-known consumer finance brands, a combination that will surpass long-time rivals JPMorgan Chase and Citigroup in terms of U.S. credit card loan volume.
Capital One shareholders will own about 60 percent of the combined company, while Discover shareholders will own about 40 percent, the statement said. The acquisition will generate $2.7 billion in pre-tax synergies.
Capital One Financial Corp. has been trying to attract more high-spending, loyal customers in recent years. Last year, it agreed to acquire digital concierge service Velocity Black, pushing further into a high-end market dominated by American Express Co. and JPMorgan Chase & Co. Discover has focused on high-quality customers with high credit ratings, even as it has historically shunned flashy sign-up bonuses and benefits used by many of its competitors.
Capital One is seeking a deal after Discover shares fell sharply in the second half of last year and the company warned it had uncovered compliance lapses that ultimately led to the resignation of then-CEO Roger Hochschild.
Discover said in January that its fourth-quarter profit fell 62% as it continued to deal with the impact of the pandemic. The company stopped buybacks last year and has been looking for a buyer for its student loan business. In December, Discover named Michael Rhodes of Toronto-Dominion Bank as its new CEO, and he was ready to take over in early March.
Article forwarded from: Jinshi Data
