Capital One Announces Deal To Acquire Discover Financial – Why We Like The Transaction


  • Capital One announced an all-stock deal to acquire Discover Financial, offering a 26.6% premium for DFS shareholders.
  • The deal is expected to close in late 2024 or early 2025, with Discover holding 40% of the combined company.
  • Capital One expects 15% earnings accretion in 2027 and on the call emphasized the value of owning Discover’s Pulse network.
  • We consider both names to be solid compounders that can grow EPS in the double-digit range through the cycle.
  • Given the move higher in DFS’s stock price and deal risk, we may consider swapping some DFS shares for COF.

Capital One To Purchase Discover Financial

Joe Raedle/Getty Images News

Background: We originally purchased Discover in 2019 and doubled down during the pandemic. Our most recent update was here. We called DFS a buy below $90 and considered it a value-priced compounder for the long run

Analyst’s Disclosure: I/we have a beneficial long position in the shares of DFS either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Long various maturities of DFS bonds and may swap DFS shares for COF

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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