Capital One’s deal to buy Discover for $35 billion ‘will shrink the marketplace a little more now,’ credit card analyst says
FortuneFeb 20
Capital One to Acquire Discover in $35B Mega-Merger
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The Facts
Capital One Financial has reached an agreement to acquire Discover Financial Services in a $35.3B deal that merges two of the largest credit card companies in the US.
The Wall Street Journal first reported the deal, which will give Discover shareholders 1.0192 Capital One shares for every Discover share — a premium of about 27% based on Discover’s $110.49 closing price Friday.
The Spin
Narrative A
The merger between Capital One and Discover is yet another victory for the US’ largest banks and lenders and another loss for consumers and competition. As millions of Americans drown in credit card debt, the leaders of two industry giants struck a deal that will only grow their wealth and stranglehold on the US economy. Perhaps regulators will intervene and stop this megacompany from forming, but it's tough to rein in these corporations that have captured so many people.
Narrative B
Companies have an obligation to deliver profits for their shareholders, and large mergers and acquisitions have been a core part of the American economy for years. Both Capital One and Discover reached a beneficial agreement that will help their shareholders and customers and allow them to offer enhanced services. It's also important to remember that both of these companies have been dealing with inflation and other economic troubles over the past few years, so this deal is very important on many grounds.
Nerd narrative
There is a 48% chance that US Household-Debt-to-GDP will surpass 100% before 2033, according to the Metaculus prediction community.