Discover's Woes Sparked Capital One's Pursuit

A regulatory filing disclosed that Capital One briefly suspended talks based on the status of its due diligence and other unspecified factors.

A period of turbulence at Discover Financial Services in Riverwood, Ill., gave Capital One Financial Group in McLean, Va., an opening to reach out about a possible merger.

Capital One agreed on Jan. 19 to buy Discover is a deal valued at $35.3 billion.

Capital One was one of several parties to contact Discover in mid-August — shortly after the card issuer announced a consent order, a $365 million liability tied to a card product misclassification, and the departure of its CEO, according to a regulatory filing tied to the proposed merger.

The filing disclosed that Capital One, which was the only company to seriously pursue Discover, briefly called off negotiations weeks before Discover hired CEO Michael Rhodes. (Rhodes just announced to become CEO of Ally Financial.)

How It All Began

The filing said that Stephen Crawford, a senior adviser to Richard Fairbank, Capital One’s chairman and CEO, called to arrange a meeting with Thomas Maheras, Discover’s chairman. During a Sept. 13 meeting, Fairbank told Maheras that Capital One was interested in paying a 30% premium over Discover’s current stock price.