Important points
- Capital One reportedly plans to acquire Discover Financial in an all-stock deal that will combine two major credit card providers.
- The deal is expected to value Discover's current market capitalization of $27.6 billion and could be announced as early as Tuesday. wall street journal report.
- Capital One plans to keep the Discover brand and switch at least some of the cards it issues to the Discover network.
- Discover has been dealing with some disruption in recent months. The company has increased its provisions for bad debts and also faces regulatory scrutiny over compliance and risk management issues.
Capital One Financial Corp. (COF) reportedly plans to acquire Discover Financial Services (DFS) in an all-stock deal that will combine two of the largest U.S. credit card companies.
A deal could be announced as early as Tuesday. wall street journal This was reported on Monday, citing a person familiar with the matter. bloomberg news Capital One reported earlier in the day that it was in ongoing discussions with advisers to evaluate a potential deal with Discover.
The report from journal He said the deal is expected to value Discover above its current market capitalization, which was $27.6 billion as of Friday's close. Capital One's market capitalization was $52.2 billion. Financial markets in the United States were closed on Monday for the President's Day holiday.
The acquisition will allow Capital One to significantly expand its credit card customer roster in addition to increasing consumer deposits since Discover now has an online banking division.
Capital One plans to keep the Discover brand and switch at least some of the cards it issues to the Discover network, the newspaper reported. journal. At the moment, the main cards issued by Capital One are Visa (V) and Mastercard (MA).
Discover has been dealing with some disruption over the past few months. The company last month reported lower-than-expected quarterly profits and warned of tough conditions facing consumers, prompting lenders to set aside higher reserves for credit losses. Discover shares plunged on the earnings report, but have recovered most of their losses over the past month.
Discover announced in August that Roger Hochschild would step down as CEO after the company disclosed misclassified credit card accounts the previous month. . The company also faced a separate investigation by the Federal Deposit Insurance Corporation, which was resolved in October when Discover reached a consent agreement with the FDIC to improve compliance and risk management.
update: This article has been updated since initial publication to include more information about the potential deal.
