One of the bets of the famous American investor is to expand his financial businesses and make the price of a share jump on the New York Stock Exchange.
The American bank Capital oneone of the last bets of the fund leader Berkshire Hathaway, Warren Buffettlaunched to purchase the credit card issuer Discover Financial Services, in an operation valued at more than US$35 billion, which will give rise to the birth of a global payments giant. The news caused a jump in the stock price of Discover more than 12% on Wall Street which started at US$110, touched 127 and closed above US$124.
The operation will be entirely in stock so, under the terms of the agreement, Discover shareholders will receive 1.0192 Capital One shares for each Discover share, which represents a 26.6% premium based on the closing price from Discover of $110.49 on February 16. In general terms, the shareholders of Capital one will own approximately 60% of the combined company, and Discover shareholders will own approximately 40%.
The founder and CEO of Capital One, Richard Fairbank, recognized that from its origins the idea was to create a payments and banking company powered by modern technology, and the acquisition of Discover is a unique opportunity to unite two successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payment networks and companies. The CEO of Discover also celebrated the agreement, Michael Rhodeswhich highlighted the tremendous potential of the combined company.
It is estimated that the transaction generate expense synergies of $1.5 billion in 2027 (26% of Discover operating expenses, plus 10% of Discover marketing expenses), for common business functions partially offset by directed investments in the Discover network. Furthermore, it is estimated that the acquisition of place network synergies for another $1.2 billion in 2027 due to the addition of Capital One debit card purchase volume and select credit card purchase volume to the Discover network. Official estimates speak of a profitability of more than 20%.
It is worth remembering that among the last known changes in Warren Buffett’s stock portfolio, the purchases of Occidental Petroleum and Capital One and sales of Chevron and Activision Blizzardamong others.
About, Capital one It was one of those last bets that resulted in the incorporation of 2,549,030 titles of Capital One Financial, increasing its participation by 25.69%, making it now one of the main companies behind Apple, Bank of America, American Express, Coca Cola and Chevron.
Source: Ambito
