Wachtell, Sullivan & Cromwell guide Capital One’s $35bn Discover acquisition

Biggest global M&A deal since start of 2024 continues rebound in megadeals following fallow 2023

Wachtell Lipton Rosen & Katz is advising Capital One on its $35.3bn acquisition of rival Discover, which is being repped by Sullivan & Cromwell, in a blockbuster deal that will bring together two of the US’s largest credit card companies. 

The all-stock deal will create a company that will surpass rivals JPMorgan Chase & Co and Citigroup by US credit-card loan volume, according to data compiled by Bloomberg Intelligence. It will also make Capital One a competitor to the likes of Mastercard and Visa through the addition of Discover’s payments network.   

Under the terms of the deal Discover shareholders will receive 1.0192 Capital One shares for each Discover share, representing a 27% premium on Discover’s closing price last Friday (16 February).  

The Wachtell team acting for Capital One was led by corporate partners Edward Herlihy, Matthew Guest and Brandon Price and included partners Jeannemarie O’Brien (executive compensation and benefits); Richard Kim (bank regulatory); Nelson Fitts (antitrust); Gregory Pessin (finance); and Joshua Holmes (tax). 

The deal continues a relationship between the two firms stretching back more than 15 years that also saw a Wachtell team rep Capital One on the acquisition of digital concierge company Velocity Black last year, with the latter advised by Latham & Watkins.  

Meantime, the mostly New York-based Sullivan & Cromwell team acting for Discover was led by firm senior chair H. Rodgin Cohen and fellow corporate partners Mitchell Eitel and Jared Fishman. It included partners Marc Treviño (executive compensation); S. Eric Wang (tax); Mehdi Ansari (IP); Joseph Matelis (antitrust); and Juan Rodriguez (global competition).  

Sullivan & Cromwell topped LSEG’s global M&A legal advisor rankings by deal value in 2021 and 2022 but was overtaken by rivals Kirkland & Ellis, Latham & Watkins and Davis Polk last year as global dealmaking fell to a 10-year low of $2.9trn. It worked on deals worth $345bn in 2023, putting it just ahead of fifth-ranked Wachtell, which advised on deals worth just north of $310bn. 

Capital One’s acquisition of Discover comes amid a resurgence in megadeals following last year’s slump as business leaders become more confident they can complete transactions. It is the biggest tie-up globally so far this year, surpassing Synopsys’s $35bn acquisition of software developer Ansys announced last month, which saw Cleary called in to advise the former and the latter repped by Skadden and Goodwin Procter. 

Capital One and Discover said in a joint statement that their tie-up was expected to generate $2.7bn in pre-tax synergies in 2027 and in the same year deliver a return on invested capital of 16%. Capital One shareholders will own around 60% of the combined company and Discover shareholders the remainder.  

The transaction is expected to close in late 2024 or early 2025, pending regulatory and shareholder approvals of both firms. 

The deal is likely to receive close scrutiny by US antitrust regulators given the size of both companies’ credit card businesses and comes as US regulators attempt to reform bank merger rules to increase scrutiny and transparency of deals.  

Centerview Partners served as financial advisor to Capital One, while Discover’s financial advisors were PJT Partners and Morgan Stanley.

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