Justice Department Won’t Challenge Capital One-Discover Merger, Report Says

Takeaways

• Capital One Financial 's proposed $35 billion acquisition of Discover Financial Services won't be challenged on antitrust grounds by the U.S. Justice Department, The New York Times reported Thursday.
• Both companies' stock rose briefly at midday Thursday on the news but later resumed a decline as part of a broader market sell-off in reaction to President Donald Trump's tariff plans.
• The merger would create an enormous payments network, a credit card issuer and a business with over 100 million customers.

The New York Times reported that the Justice Department has not blocked the acquisition of Discover Financial Services by Capital One Financial (COF), despite the fact that the plan to acquire Discover Financial Services (DFS), does raise concerns about competition.

The news removes a potential roadblock to the proposed $35 billion merger between two of the largest credit card companies in the United States. The Federal Reserve or the Office of the Comptroller of the Currency might still block the deal. But they are generally viewed to be less likely to object.

Capital One shares and Discover shares both rose at midday after the report. They were eventually dragged down amid a broad decline for stocks which began late Wednesday night when President Donald Trump imposed a new round of tariffs.

Capital One shares have fallen nearly 9% since Wednesday’s closing, while Discover’s shares are down by about 7%. This is in line with the drop in shares of banks and financial services on Thursday.

Capital One agreed to acquire Discover for $35,3 billion in early 2020. The merger will create a payments giant, a major credit card issuer and a business that has more than 100 millions customers.

Executives estimate that the merger will increase earnings per share of the combined company by 2027.