Capital One Financial will buy Discover Financial Services for $35.3 billion, the credit card companies announced Monday evening. Discover Financial stock jumped early Tuesday while Capital One fell.
The all-stock deal offers a 27% premium to Discover Financial's Friday closing price of 110.49. Capital One will pay 1.0192 shares for each DFS share.
Discover Financial has had a rocky period, with Roger Hochschild stepping down as CEO in August amid costly compliance errors. However, Discover also has its own payments network, a key reason for the deal. Capital One uses Visa and Mastercard payments networks for most of its cards, but will switch at least some to Discover's.
Capital One expects cost synergies of $1.5 billion in 2027, and network synergies of $1.2 billion.
Discover stock has a market capitalization of $27.6 billion. Capital One stock's valuation is $52.3 billion.
Discover stock jumped nearly 14% before the open to 125.50, signaling a gap up above 113.42 buy point from a cup-with-handle base. DFS stock has dipped 1.7% this year, including a 10.8% tumble on Jan. 18 after reporting tumbling Q4 earnings. Discover Financial has been finding support at a rising 50-day line since then.
Capital One stock retreated nearly 4% in premarket trade. COF stock has risen 4.7% in 2024, rebounding last week from the 10-week line, near 52-week highs.
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