Capital One-Discover merger comment period extended by Feds in move seen as routine

By Steve Gelsi

Blockbuster $35B deal to draw remarks by interested parties until May 31

A comment period extension for the blockbuster $35 billion acquisition of Discover Financial Services by Capital One Financial Corp. isn't a signal that the deal will be spiked for being anti-competitive, analysts said.

The reaction from analysts at TD Cowen came after the Federal Reserve and Office of the Comptroller of the Currency said late Wednesday they would take comments on the bid by Capital One (COF) to buy Discover (DFS) until May 31 instead of April 26.

"We do not see this as a negative for the deal," TD Cowen analyst Jaret Seitberg said in a research note. "And we continue to question if the government could succeed in blocking the transaction in court on antitrust grounds."

The extension of comment periods has already become a routine move by regulators, often as a way to reduce political pressure over a merger review, Seitberg said.

TD Cowen's Seitberg said the bank still expects the deal to close 12 to 18 months after it was initially announced on Feb. 20 as one of the larger merger deals in the financial services space in recent years.

"We continue to expect regulators to approve this deal as we question if there are legal grounds to block it," Seitberg said.

Looking ahead, the next critical date will be a hearing on the Community Reinvestment Act and whether the deal may affect access to financial services in lower-income neighborhoods. That's expected to take place in September or October, TD Cowen said.

The merger would create the nation's sixth-largest bank by assets, according to Federal Reserve data. That means the Fed and the Office of the Comptroller of the Currency are legally required to determine whether the combination is in the public interest before approving it.

Also read: Do we need another too-big-to-fail bank?' Capital One-Discover merger's fate could depend on 2024 presidential election.

Greg Robb and Emily Bary contributed.

-Steve Gelsi

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04-25-24 0710ET

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