One Credit Card Giant Is Buying Another

UPDATE Feb 19, 2024 8:54 PM CST

Capital One and Discover Financial Services announced Monday that, as expected, the former is buying the latter for $35 billion. Discover's shareholders will receive shares of Capital One valued at almost $140, per the news release cited by the AP. Discover shares were trading at $110.49 when trading closed Friday. As of the third quarter, Virginia-based Capital One was the 12th biggest bank in the US and Illinois-based Discover was the 33rd largest. The merger comes as Americans are increasing their use of credit cards and interest rates are soaring—but increased borrower defaults are also a significant risk.

Feb 19, 2024 4:52 PM CST

A deal is in the works to combine two of the nation's largest credit card companies. Capital One wants to buy Discover Financial Services, the Wall Street Journal reports, in an all-stock transaction that could be announced as soon as Tuesday. Capital One, which is the ninth-biggest bank in the country, has a market value around $52 billion. Discover's is about $28 billion, though the deal would probably value it higher. Capital One would gain access to a new credit card network with more than 300 million customers at a time when credit card use and debt are on the increase.

"Discover has done a better job of bringing in a lot of deposits and [has] access to a lot of institutions to run the debit card network and provide service," says analyst David Schiff at West Monroe, per CNBC. "So it gives them a lot of deposit gathering ability, which particularly in the current market is enormously important." The acquisition would give Capital One more power in the payments sector. Per the New York Times, Visa and Mastercard have far more cardholders than Discover, which has changed bosses and faced more regulatory scrutiny lately. Still, technology companies and banks have shown interest in taking over the company for years. (More mergers and acquisitions stories.)