Capital One and Discover merger approved by Federal Reserve

A sign is displayed at the entrance of a Capital One bank branch in Manhattan. The Federal Reserve and the Office of the Comptroller of the Currency have officially approved Capital One Financial’s $35.3 billion all-stock acquisition of Discover Financial Services. The approval was announced by regulators on Friday.

The Fed stated that they evaluated the application based on various factors, including the financial and managerial resources of the companies, the needs of the communities to be served, and the competitive impacts of the proposal. Capital One had initially announced the agreement to acquire Discover in February 2024, and the acquisition includes obtaining Discover Bank.

As part of the deal, Discover shareholders will receive 1.0192 Capital One shares for each Discover share, representing a 26% premium based on Discover’s closing price at the time. The merger of Capital One and Discover, two major credit card issuers in the U.S., is expected to enhance Capital One’s deposit base and credit card offerings.

Capital One has agreed to comply with the Fed’s actions against Discover, which includes a $100 million fine imposed on Discover for overcharging interchange fees from 2007 to 2023. The company will be repaying these fees to affected customers. The OCC has approved Capital One’s application under the condition that corrective actions are taken to address outstanding enforcement actions against Discover.

Upon completion of the merger, Capital One shareholders will own 60% of the combined company, while Discover shareholders will have a 40% stake. The deal is expected to close on May 18, according to a joint statement released by Capital One and Discover.