The Mega-Credit Merger 💳

The Mega-Credit Merger

On Monday, a revolutionary move was announced that has the potential to shift the landscape of the credit card industry. Two out of the country’s six largest credit card companies decided it was time to join forces, with Capital One acquiring Discover Financial Services. After being rumored by the Wall Street Journal over the weekend, Capital One has been set to acquire its competitor in a $35.3 billion all-stock deal. Under the deal, Discover shareholders will receive a 26% premium from the firm’s closing price on Friday, leading to its stock to soar throughout Tuesday’s trading day. Although Capital One shares didn’t move, the share price for Discover’s stock grew 12.61% by the bell.

As part of the deal, it is reported Capital One will continue to keep the Discover brand under the merger. As the fourth-largest credit card company by purchase volume, the acquisition will make Capital One a valuable competitor to Citi, AmEx, and Chase. By expanding offerings and its customer base, Capital One will be able to leverage Discover’s debit card network and robust deposit-gathering ability to capture market share in the next several years. This isn’t the first purchase Capital One has made recently, as the firm also purchased the premium card and luxury market platform Velocity Black last year. Nevertheless, the companies plan to close the deal later this year or through 2025, but investors should keep an eye on whether the FTC will play a role in regulating the deal in the next several months.

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