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Data: Yahoo Finance; Chart: Axios Visuals

Capital One has agreed to buy Discover in an all-stock transaction valued at $35.3 billion, the two companies announced Monday evening.

Why it matters: Discover has underperformed its peers in the last year and been battered by scandal — CEO Roger Hochschild resigned in December amid compliance issues.

Between the lines: The deal will give Capital One one of four major U.S. card networks if it closes.

The U.S. Senate has taken aim at Visa and Mastercard, the larger two of the quartet. Senate Majority Whip Dick Durbin (D-Ill.) recently pushed a bill that requires banks to offer multiple payments networks with their credit cards in an effort to combat fees.

"The Visa-Mastercard duopoly controls over 80 percent of the U.S. credit card network market," he wrote, noting that networks that are issuers (like Discover and American Express) would not be required to add another network.

By the numbers: The deal comes at a premium, with Discover's market capitalization at about $27.6 billion currently, and Capital One at about $52.2 billion.

The companies say the deal is expected to close in late 2024 or early 2025, pending regulatory approval.

Of note: Both companies are known for their larger portfolio of low and subprime customers compared to their competitors.

Discover has been particularly under pressure, with the company saying it expects to spend $500 million or more on compliance and risk this year.

Those comments came after the FDIC issued Discover a consent order to Discover in September, saying it failed to establish a compliance system that met consumer protection laws.

Discover was also currently seeking to exit its $10.4 billion student loan portfolio,

Capital One to buy Discover for $35.3 billion

The merged company would be one of the top four credit card companies.

Fintech

This line chart shows the stock performance of five credit card companies, with Mastercard performing best and Discover the worst of the five. 

Capital One has agreed to buy Discover in an all-stock transaction valued at $35.3 billion, the two companies <a class="gtmContentClick" data-vars-link-text="announced Monday evening" data-vars-click-url="https://investor.capitalone.com/news-releases/news-release-details/capital-one-acquire-discover" data-vars-content-id="9424f162-26d1-4997-9b6a-e45b012b2d44" data-vars-headline="Capital One to buy Discover for $35.3 billion" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://investor.capitalone.com/news-releases/news-release-details/capital-one-acquire-discover" target="_blank">announced Monday evening</a>.Why it matters: Discover has underperformed its peers in the last year and been battered by scandal — CEO Roger Hochschild resigned in December amid compliance issues.

Capital One to buy Discover for $35.3 billion

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