US bank Capital One has agreed to take over US credit card issuer Discover Financial Services for about $35 billion. The companies announced this in a joint statement. The transaction is to be carried out through a share swap and is still subject to approval by regulators and shareholders.
A potential shift in U.S. banking landscape
The merger of Capital One and Discover would create the sixth-largest bank in the United States in terms of assets and a major player in the US credit card market to compete with rivals JPMorgan Chase and Citigroup, Reuters reported.
Under the agreement, Discover shareholders will receive 1.0192 shares of Capital One for each of their shares. The purchase price thus includes a premium of nearly 27 percent to Discover’s closing stock price on Friday. If the transaction is completed, Capital One shareholders will own 60 percent of the merged business.
Unlocking potential
According to analyst firm Baird, the merger would have a “significant strategic benefit” because it would open up room for cost reductions and allow Capital One’s cards to use Discover’s network.
One of Capital One’s major shareholders is US billionaire Warren Buffett, who is one of the world’s richest men and has earned the nickname the Oracle of Omaha for his successful investments. Buffett’s investment company Berkshire Hathaway owns a 3.28 percent stake in Capital One, making it its seventh-largest shareholder, Reuters reports.
Source: Czech Press Office
