Federal Reserve Greenlights Capital One’s $35.3 Billion Acquisition of Discover

Federal regulators have formally approved Capital One Financial’s $35.3 billion all-stock acquisition of Discover Financial Services.

The Federal Reserve and the Office of the Comptroller of the Currency (OCC) announced the decision Friday, signaling the green light for one of the most significant banking mergers in recent years.

According to CNBC, the Federal Reserve evaluated the merger based on several legal and financial criteria, including the financial strength of both institutions, the managerial capacity of the combined entity, the expected impact on communities, and how the transaction could affect industry competition and financial stability.

Initially announced in February 2024, the acquisition includes Discover Bank and positions Capital One to significantly bolster its footprint in the consumer finance space. Under the terms of the agreement, Discover shareholders will receive 1.0192 shares of Capital One for each Discover share—a premium of roughly 26% based on Discover’s share price at the time of the announcement, per CNBC.

Read more: Capital One/Discover Deal: Rumored Concerns Lack Substance

Both Capital One and Discover rank among the country’s largest credit card issuers. The merger is expected to not only broaden Capital One’s deposit base but also enhance its credit card portfolio and consumer lending capabilities. Once the deal is finalized, Capital One shareholders will hold 60% of the newly formed company, while Discover shareholders will control the remaining 40%.

In a joint statement, the two companies reaffirmed that the transaction is on track to close on May 18, barring any unexpected developments.

Source: CNBC