Capital One in Advanced Talks to Acquire Discover

Capital One, a US consumer lender backed by Warren Buffett, is reportedly in advanced negotiations to acquire Discover Financial Services, a major credit card issuer. Sources familiar with the matter suggest that an official announcement could be made as early as Tuesday, indicating a potential significant development in the financial industry.

While specific details regarding the magnitude of the merger remain undisclosed, the potential combination of Capital One and Discover would unite two of the largest credit card companies in the United States. If finalized, this deal could mark the most substantial bank transaction in the U.S. since Bank of America’s acquisition of Merrill Lynch for $50 billion in 2009.

According to data from LSEG, Capital One holds a valuation of $52.2 billion and ranks as the fourth-largest participant in the U.S. credit card market by volume as of 2022, as reported by Nilson. On the other hand, Discover boasts a market capitalization of $27.6 billion and stands as the sixth-largest player in the U.S. credit card arena.

As of now, neither institution has responded to requests for comments regarding the potential acquisition. Initial reports on the discussions were brought to light Bloomberg News.

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The anticipated deal is expected to encounter rigorous scrutiny, especially amid the ongoing efforts of President Joe Biden’s administration to bolster competition across various sectors of the economy. In 2021, President Biden issued an executive order specifically targeting bank mergers, underscoring the administration’s commitment to fostering a more competitive landscape.

Jeremy Kress, a business law professor at the University of Michigan and former regulator at the Federal Reserve specializing in bank mergers, expressed his anticipation of substantial regulatory scrutiny should the merger proceed. “I predict that this deal, if it materializes, will provoke a significant push-back and receive heightened regulatory scrutiny,” Kress stated in an email to Reuters.

As the financial landscape potentially undergoes a significant transformation with this proposed acquisition, market observers and regulatory authorities are poised to closely monitor developments in the days ahead.

Source: Reuters