April 18 (UPI) — Capital One’s planned $35.3 billion acquisition of a rival credit card company, Discover, was approved by two regulators, the Federal Reserve and the Office of the Comptroller of the Currency, on Friday.

The merger will create the largest credit card issuer, as well as expand Capital One’s deposit base.

Capital One entered into a definitive agreement to acquire Discover in February 2024 and expects to close the deal on May 18, the company said in a news release.

Through the transition, it would acquire Discover Bank, which was approved by the Office of the Comptroller of the Currency.

“The Board evaluated the application under the statutory factors it is required to consider, including the financial and managerial resources of the companies, the convenience and needs of the communities to be served by the combined organization, and the competitive and financial stability impacts of the proposal,” the Fed said in a release.

It is an all-stock deal.

Discover shareholders will receive 1.0192 Capital One shares for each Discover share, or about a 26% premium from Discover’s closing price of $110.49 at the time, Capital One said in a release.

Capital One shareholders will hold 60% of the combined company and Discover shareholders own 40%.

As a condition merger, Capital One said it will comply with the Fed’s penalty against Discover, according to the release. The Fed fined Discover $100 million for overcharging certain interchange fees from 2007 through 2023. The company is repaying those fees to affected customers.

“This is an exciting moment for Capital One and Discover,” Richard Fairbank, founder, chairman and CEO of Capital One, said. “We understand the critical importance of a strong and competitive banking system to our customers and our economy, and we appreciate the thoughtful and diligent engagement of our regulators as they thoroughly reviewed this deal over the past 14 months.

“I am grateful to the thousands of associates across Capital One and Discover who have worked tirelessly to help us achieve this significant milestone. We look forward to bringing these two great companies together with a profound sense of possibility and responsibility to deliver for our customers, associates, shareholders, and communities.”

All required regulatory approvals have now been received.

“The combination of our two great companies will increase competition in payment networks, offer a wider range of products to our customers, increase our resources devoted to innovation and security, and bring meaningful community benefits,” Michael Shepherd, interim CEO and president of Discover, said.

No immediate changes to Capital One and Discover customer accounts and relationships are planned.

Capital One had more than 100 million customers with Discover at 74.5 million. In all, there are about 190.6 million ones in use.

The Discover brand credit cards represent 8% of all of them, the third largest behind Visa at 48% and Mastercard at 36% but ahead of American Express at 17%. Capital One was far behind.

Capital One Financial Corporation was founded in 1988 and headquartered in McLean, Va. It had $362.7 billion in deposits and $490.1 billion in total assets as of Dec. 31.

It grew from a credit card company to a Fortune 500 full-service bank with operations in the US, Canada and Britain. Capital One trades on the New York Stock Exchange. Markets were closed Friday.

Discover Financial Services became a credit card issuer in 1983 and was introduced by Sears. It operates Diners Club International.