Financial services giant Capital One has agreed to purchase Discover Financial Services for $35 billion in stock. The deal combines two major US credit card providers into an expanded consumer banking powerhouse.
Under terms announced Monday, Discover shareholders will receive Capital One stock valued at nearly $140 per share, significantly more than Discover’s $110.49-per-share price recorded on Friday afternoon.
The merger brings together the specialties of both companies. Capital One and Discover focus narrowly on credit cards and personal loans for everyday American households. This focus makes Capitol One-Discover more similar to American Express than to JPMorgan Chase and Citigroup.
“This marketplace that’s dominated by the big players is going to shrink a little bit more now,” LendingTree’s chief credit card analyst Matt Schulz told the Associated Press contributed to this article.
While the impact remains uncertain, the deal may shake up the payments processing sector long controlled by Visa and Mastercard. With consolidated scale, the new credit card giant could renegotiate terms or even develop proprietary networks.
However, approvals are no guarantee. Experts predict intense regulatory scrutiny into this potentially anti-competitive deal. Consumer groups will also pressure officials to extract public benefit concessions as conditions.
For now, Capital One is tempering expectations, and cardholders are continuing business as usual.
However, the company may be scrambling internally. It’s likely commenced extensive planning to merge systems, cut costs, and expand customer reach.
With a long-speculated deal finally announced, the two companies have accelerated the consolidation already happening within the industry . Schulz put it simply. “It’s a blockbuster deal that’s going to change the trajectory of fintech,” he said.
The Associated Press contributed to this article.