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Capital One Financial is destined to acquire Discover financial services, according to a Wall Street Journal report. The deal could be announced on Tuesday, the newspaper said, citing sources.
It will be an all-stock deal and Capital One, which it already uses Visa AND MasterCard networks, plans to keep the Discover brand, the Wall Street Journal said.
“Discover has done a better job attracting a lot of deposits and [has] access to many institutions to manage the debit card network and provide services. So it gives them a lot of deposit-taking capacity, which particularly in today’s market is enormously important,” said David Schiff, West Monroe’s head of consumer retail and banking.
CNBC requested comment from both Capital One and Discover.
The merger of the two companies, which are among the largest credit card issuers in the United States, would expand Capital One’s credit card offerings and its deposit base. The company bought digital concierge service Velocity Black, a premium credit card and platform for the luxury market, in June last year.
There aren’t many parallels for similar acquisitions in the financial sector, meaning the Capital One-Discover deal will likely have broad implications for merger activity within the sector, Schiff said.
“It’s a good example of the risk that we’re seeing in the market, where regulators’ competing interests for greater scrutiny and rigor are balanced against competitive demands that are being made quite clearly, in terms of the overall market,” Schiff said .
The deal comes at a time of growing pressure for Discover, including regulatory scrutiny and new leadership. Current CEO Michael Rhodes was announced in December 2023.
Shares of Discover have fallen 1.7% for the year, giving the company a market capitalization of $27.63 billion. Capital One has a market capitalization of $52.2 billion and the company’s shares will rise 4.6% in 2024.
Bloomberg News reported Monday that Capital One was considering acquiring Discover.
The Capital One-Discover merger would be one of the largest deals announced so far this year. Synopsis announced an agreement to purchase Ansys for $35 billion in January and Diamondback EnergyPrivate oil and gas producer Endeavor Energy’s $26 billion deal was announced on February 12.
Read the full story here: Capital One is buying Discover Financial, sources say