by Anirban Sen and Michelle Price

NEW YORK/WASHINGTON (Reuters) – U.S. bank Capital One announced plans late on Monday to buy credit card company Discover Financial Services in an all-stock deal valued at $35.3 billion.

The deal is expected to come under scrutiny from competition authorities because it would create the sixth-largest U.S. bank by assets and a U.S. credit card giant that would compete with rivals JPMorgan Chase and Citigroup.

Discover has a network that spans 200 countries and territories but the company remains much smaller than its rivals Visa, Mastercard and American Express.

“This acquisition brings scale and investment, allowing the Discover network to be more competitive with larger payment networks,” Capital One and Discover said in a statement.

In detail, Discover shareholders will receive 1.0192 Capital One shares for each Discover share, representing a 26.6% premium to Discover’s closing price on Friday.

On Wall Street, Capital One shares rose 4.6% in pre-stock trading and Discover shares rose 14.5%.

If the transaction is completed, Capital One shareholders will own 60% of the combined company and Discover shareholders the remaining 40%.

According to Capital One, which counts investor Warren Buffet and his company Berkshire Hathaway among its shareholders, the merger should be approved by regulators in late 2024 or early 2025.

The operation, however, comes at a delicate time for bank mergers in the United States since a 2021 decree from the Biden administration aimed at promoting competition in the American economy.

(Reporting by Anirban Sen and Michelle Price; with contributions from Maria Ponnezhath, Juveria Tabassum, Chris Sanders and Kane Wu; writing by Carolina Mandl; Blandine Hénault for the , editing by Kate Entringer)

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