Capital One to buy Discover Financial in $35.3bn all-stock deal

NEW YORK/WASHINGTON (Reuters) -- Capital One, a U.S. consumer lender backed by Warren Buffett, on Monday said it will acquire credit card issuer Discover Financial Services in an all-stock transaction valued at $35.3 billion.

The tie-up, which will combine two of the largest U.S. credit card companies, aims at building "a payments network that can compete with the largest payments networks and payments companies," Richard Fairbank, chairman and CEO of Capital One, said in a statement.

Visa, Mastercard and American Express are among other U.S.-based payments networks.

Discover shareholders will receive 1.0192 Capital One shares for each Discover share, a 26.6% premium over Discover's closing price on Friday.

When concluded, Capital One shareholders will own 60% of the combined company, while Discover shareholders will own approximately 40%, according to the statement.

Capital One, valued at $52.2 billion, is the fourth largest player in the U.S. credit card market by volume as of 2022, according to Nilson, while Discover is the sixth.

The deal is expected to be approved by regulators in late 2024 or early 2025, Capital One said.

The transaction is likely to experience intense scrutiny as Democratic President Joe Biden's administration continues to focus on boosting competition in all areas of the economy, including a 2021 executive order aimed at bank deals.

"I predict that this deal, if it materializes, will provoke a significant push-back and receive heightened regulatory scrutiny," Jeremy Kress, a University of Michigan professor of business law who previously worked on bank merger oversight at the Federal Reserve, wrote in an email to Reuters.

"It will be the first big test of bank merger regulation since the Biden