Capital One Financial in McLean, Va., has agreed to buy Discover Financial Services in Riverwood, Ill., for $35.3 billion.
Capital One said in a press release that it will pay $35.3 billion in stock for Discover. The deal is expected to close in late 2024 or early next year.
“From Capital One’s founding days, we set out to build a payments and banking company powered by modern technology,” Richard Fairbank, Capital One’s chairman and CEO, said in the release.
The acquisition “is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises and to build a payments network that can compete with the largest payments networks and payments companies,” Fairbank added.
The deal is expected to be more than 15% accretive to Capital One’s 2027 adjusted non-GAAP earnings per share.
Capital One said it plans to cut $1.5 billion of expenses by 2027, including 26% of Discover’s operating expenses and a tenth of its marketing costs.
The deal should generate $1.2 billion of “network synergies” in 2027 by converting Capital One’s debit portfolio and selected credit card portfolios to Discover’s network. That conversion is expected to take place in the second quarter of 2025.
Capital One plans to incur $2.8 billion of pretax merger-related expenses.
Three Discover directors will join Capital One’s board.
Centerview Partners and Wachtell, Lipton, Rosen & Katz advised Capital One. PJT Partners, Morgan Stanley and Sullivan & Cromwell advised Discover.