Capital One Financial (COF) will buy Discover Financial Services (DFS) for $35.3 billion, the credit-card companies announced Monday evening.
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The all-stock deal offers a 27% premium to Discover Financial’s Friday closing price of 110.49. Capital One will pay 1.0192 shares for each DFS share.
Discover Financial has had a rocky period, with Roger Hochschild stepping down as CEO in August amid costly compliance errors. However, Discover also has its own payments network, a key reason for the deal. Capital One uses Visa (V) and Mastercard (MA) payments networks for most of its cards, but will switch at least some to Discover’s.
Capital One expects cost synergies of $1.5 billion in 2027, and network synergies of $1.2 billion.
Discover stock has a market capitalization of $27.6 billion. Capital One stock’s valuation is $52.3 billion.
COF stock has risen 4.7% in 2024, rebounding last week from the 10-week line, near 52-week highs. DFS stock has dipped 1.7% this year, including a 10.8% tumble on Jan. 18 after reporting tumbling Q4 earnings. Discover Financial, which has been finding support at a rising 50-day line since then, is close to a 113.42 buy point from a cup-with-handle base.
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