In a year-long pursuit,JPMorgan Chase& CoJPM discussed a potential deal withDiscover Financial ServicesDFS beforeCapital One Financial CorpCOF sealed the $35 billion bid forthe credit card company.
The primary motivation behind JPMorgans interest was gaining control of Discovers Pulse electronic payments network.
Despite actively exploring the deal from mid-2021, JPMorgan eventually abandoned its efforts in mid-2022 when it couldnt convince Discover of its merits.
A potential JPMorgan-Discover mergerfacedsignificant regulatory challenges, considering JPMorgans position as the largest U.S. credit card lender, the Financial Times noted.
The Capital One deal, which recently relegated JPMorgan to second place, emphasizes the banking giants commitment to owning a payments network and reducing reliance on third-party providers likeVisa IncV andMastercard IncMA .
Sources close to the discussions revealed that a JPMorgan-Discover deal, codenamed Diplomat, would have been a game-changer for the company.
Discover stands out in the industry by operating as a card issuer and a payments network, a rare combination, the FT report highlights.
Capital Ones CEO,Richard Fairbank, referred to this dual capability as the banks Holy Grail after securing the deal. On the other hand, JPMorgan faced regulatory limitations due to its colossal size, preventing it from acquiring other banks.
Despite these hurdles, JPMorgans CEO,Jamie Dimon, supported efforts to acquire all or part of Discover.
However, the regulatory and antitrust challenges associated with a JPMorgan-Discover deal were substantial.
While doubts about regulatory approval for Capital Ones Discover acquisition linger, the path seems less arduous than if JPMorgan were the buyer.
An enlarged Capital One would control less than 10% of U.S. deposits, a crucial factor that could facilitate a smoother approval process compared to JPMorgan, which already surpasses that threshold.
Price Action:COF stock is up 1.01% at $137.11, and DFS shares are up 1.81% at $121.56 on the last check Thursday.
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