Acquired by Capital One

Capital One Financial Corporation announced its intention to acquire Discover Financial Services in an all-stock transaction valued at approximately $35.3 billion. This strategic acquisition creates a payments giant with 70 million merchant acceptance points in more than 200 countries and regions, and is an important step toward building a globally competitive payments platform.

For small business owners, this development is especially noteworthy. The merger positions the combined company to compete with the largest payment companies and promises increased value and expanded opportunities for more than 100 million customers, including a significant number of small and medium-sized businesses. Capital One’s acquisition of Discover will not only increase the scale of its business, it will also leverage the technology advancements and data ecosystems of both companies to offer attractive deals to both consumers and small businesses while providing merchants with This is a strategic move to boost sales.

Under the terms of the agreement, Discover shareholders will receive 1.0192 Capital One shares for each Discover share they own, representing a 26.6% premium based on Discover’s closing price on February 16, 2024. It is converted to . This exchange ratio means that Capital One shares will be acquired at closing. One shareholder will own approximately 60% of the combined company, with Discover shareholders owning the remaining 40%.

Richard Fairbank, founder, chairman and CEO of Capital One, highlighted the merger as a unique opportunity to bring together two successful companies with complementary capabilities. Fairbank highlighted its potential to compete with top payment networks and deliver significant value to all stakeholders as technology continues to revolutionize the payments and banking sector.

Echoing this sentiment, Discover CEO and President Michael Rhodes acknowledged that the merger is a testament to Discover’s strong business model and the dedication of its employees. Mr. Rose expressed his enthusiasm for the growth potential and enhanced shareholder value that the combined entity seeks to realize.

Strategically, the merger aims to combine Discover’s extensive merchant acceptance points with Capital One’s technological and customer-centric approach to create a strong, globally competitive payments network. Masu. The cooperative is expected to increase sales for its members and offer greater deals for consumers and small businesses thanks to its increased scale and investment in the Discover network.

The transaction also promises compelling financial results, with $2.7 billion of pre-tax synergies expected to be accretive to adjusted non-GAAP EPS of more than 15% in 2027. Additionally, we expect this transaction to deliver a 16x return on invested capital (ROIC). % in 2027, with an internal rate of return (IRR) of over 20%.

Both companies are committed to maintaining a strong presence in the community, and Capital One continues its important community investment efforts, including $200 million in impact initiatives. The merger is expected to further strengthen Capital One’s balance sheet, with a CET1 ratio of approximately 14% at closing and 84% of the company’s deposits guaranteed at the end of 2023.

The transaction is expected to close in late 2024 or early 2025, pending regulatory approval and shareholder consent. Upon completion, the combined board will include three members from Discover to ensure smooth integration and strategic continuity.

For small business owners, the combination of Capital One and Discover signals a future of enhanced payment solutions, expanded access to innovative financial products, and a stronger, more competitive marketplace. As the combined company leverages its technological capabilities and vast customer base, the small business community will benefit from improved sales opportunities, more favorable trading terms, and a wide range of services designed to meet the unique needs of an increasingly digital economy. They will benefit from things like access to financial services. .

Capital One acquires Discover, creating a payments giant that increases value for small businesses and consumers around the world.

Image: Discover, Capital One