Capital One Financial Corp. announced earlier that it has agreed to acquire Discover Financial Services in an all-stock transaction valued at $35.3 billion, creating a payments powerhouse that will serve over 100 million customers.

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The deal, which is expected to close in late 2024 or early 2025, will combine Capital One’s banking and credit card businesses with Discover’s global payments network and digital banking platform. The combined company will have a presence in more than 200 countries and territories, and will compete with the largest payments networks and companies in the world.

Under the terms of the agreement, Discover shareholders will receive 1.0192 Capital One shares for each Discover share, representing a premium of 26.6% based on Discover’s closing price on February 16, 2024. Capital One shareholders will own 60% of the combined company, while Discover shareholders will own 40%. Three Discover board members will join the Capital One board of directors upon closing of the deal.

Capital One founder, chairman and CEO Richard Fairbank said the acquisition of Discover “is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises” and will enable the company to “build a payments network that can compete with the largest payments networks and payments companies.”

Discover CEO and president Michael Rhodes said the deal “underscores the strength of our business and is a testament to the hard work of Discover employees.” He added that the company looks forward to “providing expanded opportunities for our loyal customers” as part of the Capital One family.

The deal is subject to regulatory approvals and approval by the shareholders of both companies. It also includes a $1.4 billion breakup fee that Capital One would have to pay Discover if another buyer emerges with a higher offer.

The deal is the latest in a series of mergers and acquisitions in the payments and fintech sector, as companies seek to expand their scale, reach and capabilities in a rapidly changing and competitive market. Last year, Visa agreed to buy fintech startup Plaid for $5.3 billion, while Mastercard acquired Finicity for $825 million. PayPal also acquired Honey, a shopping and rewards platform, for $4 billion.

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(1) Capital One to Acquire Discover | Capital One Financial Corp.. https://investor.capitalone.com/news-releases/news-release-details/capital-one-acquire-discover.

(2) Capital One buying Discover, acquisition worth $35 billion – USA TODAY. https://www.usatoday.com/story/money/2024/02/20/capital-one-discover/72668091007/.

(3) Capital One To Acquire Discover Financial For $35.3 Billion – Investopedia. https://www.investopedia.com/capital-one-to-acquire-discover-financial-for-usd35-3-billion-8584863.

(4) Capital One Plans to Acquire Discover — What It Means for Customers. https://www.businessinsider.com/personal-finance/capital-one-discover-acquisition-what-it-means-for-customers-2024-2.