Capital One Financial’s bid to acquire Discover Financial Services has received the green light from both the Federal Reserve and the Office of the Comptroller of the Currency. The regulators announced their approval of the $35.3 billion all-stock transaction on Friday.
The Federal Reserve emphasized that its decision was based on a thorough evaluation of various statutory factors. These included the financial and managerial resources of the merging entities, the convenience and needs of the communities they will serve, and the implications for competitive and financial stability.
The proposed agreement was first revealed by Capital One in February 2024, which includes an indirect acquisition of Discover Bank as part of the transaction.
According to the terms of the deal, shareholders of Discover will receive 1.0192 shares of Capital One for each share of Discover, representing a premium of approximately 26% based on Discover’s closing price of $110.49 at the time of the announcement.
Both Capital One and Discover rank among the largest credit card issuers in the United States. This merger is set to bolster Capital One’s deposit base and diversify its credit card offerings.
Upon completion of the deal, Capital One shareholders are expected to retain 60% ownership of the newly combined company, while Discover shareholders will hold the remaining 40%. This information was provided in a statement released in February 2024.
In a collaborative announcement, both companies indicated their intentions to finalize the merger by May 18.
