WILMINGTON – A $35.3 billion transaction is on the horizon for two Delaware-incorporated entities as a merger begins to finalize.
“It’s a pretty sizable bank deal by historical standards,” Capital One’s Executive Vice President and Head of External Affairs Andres Navarrete told the Delaware Business Times as he explained his company’s plan to acquire Discover Financial Services and Discover Bank. The plan was first announced in February.
Capital One Financial Corporation still has several steps in the acquisition process, both at the state level and nationally, before they can seal the deal on the transaction. But while they wait, Navarrete said a team is in place at Capital One to ensure the transition is as seamless as possible when the time comes.
“This is a great franchise and they have some pretty unique aspects that they’ve built over time,” he told DBT in an exclusive interview a day before a public meeting was held by the State Bank Commission in Dover at the Tatnall Building Friday, Aug. 9. “We expect the remaining application to occur largely behind the scenes. . . We will hopefully have approval by the end of the year.”
If approved, Capital One and Discover will be clear to close on their new deal, allowing the two companies to ink the transaction and start to integrate which Navarrete anticipates will be a multi-year process.
“I don’t think customers will necessarily feel the change day one. They’ll be able to continue using their cards, Discover branded, it will seem seamless to them. But, over time, they’ll start to feel more of Capital One’s ownership through technology, customer service, network and additive [benefits],” he said.
Perhaps more importantly, he added, Discover’s current employees, including Delaware’s roughly 1,000 workers located primarily in the Greenwood area, will remain with the company during the transition as will the philanthropic efforts of both entities.
Navarrete emphasized that while both companies have headquarters in other states – Discover in Illinois and Capital One in Virginia, they both maintain “significant presences” in the First State. Compared to Discover’s 1,000 Delaware-based employees, Capital One boasts 1,300 in the Wilmington area.
“We’ve always thought of Delaware as a strong labor market and one that we want to invest in,” he told DBT. “We’re also increasing the depth of relationships with different community organizations.”
As a part of the acquisition, Capital One released a $265 billion, five-year Community Benefits Plan which highlighted company-based support and investments in “critical economic priorities including housing affordability, no-fee banking access and small business growth.”
Capital One Founder, CEO and Chairman Richard Fairbank said in a press release announcing their plan said, “Our commitments to financial inclusion and well-being are core to who we are as a company. . . That comes to life in our product portfolio, which serves the full spectrum of American consumers and in the investments we make in our communities. We have a long history of developing innovative ways to serve these core constituencies, and we are committed to ensuring, through this community benefits plan, that our acquisition of Discover builds on our history of positive impact.”
In a letter written to Federal Reserve Bank of Richmond Chairwoman Jodie McLean, Delaware State University (DSU) President Tony Allen called Capital One, specifically as it related to the Historically Black University, as “stalwart in living its values” when it comes to that community support.
Navarrete contends that DSU is just one of many organizations supported by Capital One in the First State and nationally, a standard that he said the company is happy to continue as it begins to focus its efforts on its acquisition of Discover while committing to maintaining the “significant presence” both companies have in Delaware.
While Capital One and Discover wait for necessary approvals so they can proceed with the acquisition, a class action lawsuit was filed in late July by two Capital One customers who filed on behalf of themselves and “on behalf of all others similarly situated” against the two companies, stating that the merger would cause increased prices, antitrust law violations and work to squash the competitive credit and banking market.
“Capital One is significantly growing. It has grown into top 10 bank,” Navarrete told DBT while discussing the benefits of the merger. “Discover has its own payment processing network, similar to Visa, Mastercard and American Express. We wanted to diversify and Discover was, in many respects, the only opportunity to do that. Add that and the feel that the network, while a tremendous asset, has an opportunity to grow. Capital One, with its larger customer base, can invest in the network to grow it into a more forbidble competitor.”