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ΔιαχειριστήςAdmin- Αριθμός μηνυμάτων : 26566
Ημερομηνία εγγραφής : 29/10/2010 
New payment giant
21/2/2024, 11:00
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Investors had some time off from the stock market on Presidents' Day, but that couldn't stop some mega deals from turning it into Merger Monday. Capital One (COF) agreed to acquire Discover Financial Services (DFS) in a stock-based transaction valued at $35.3B, creating a new financial giant that will better compete with the likes of Visa (V) and Mastercard (MA). Besides payment networks, the two companies will also form the largest U.S. credit card issuer by loan volume, as well as the sixth-largest U.S. bank by assets, which is sure to attract extra attention from regulators.Reaction: In typical M&A fashion, shares of Discover (DFS) are up 13.6% to $125.53 in premarket trade, while Capital One (COF) is down 4.3% to $131.31 on the news. Many are hoping the deal will translate into lucrative interest charges as credit card debt and delinquency rates continue to climb in the aftermath of the pandemic. Upon completion of the transaction, Capital One stockholders will own around 60% of the combined firm, with Discover investors owning the rest.
Note that the agreement comes after Discover hit some turbulence in August 2023 when its then-CEO, Roger Hochschild, left the company. At the time, analysts suspected his exit was related to increased regulatory and risk oversight concerns. The company disclosed in its Q2 results a $365M charge related to a misclassification issue, which caused DFS to provide refunds to its merchants and merchant acquirers. In December, Discover said Michael Rhodes, formerly with TD Bank, would become its CEO as of March 6.
More details: Capital One anticipates the mega deal to generate $2.7B in pretax synergies and add more than 15% to its adjusted EPS in 2027. It's also expected to deliver a return on invested capital of 16% in 2027 with an internal rate of return of more than 20%. A conference call discussing the tie-up will take place this morning at 8:00 AM ET. (79 comments)
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