In an all-stock deal estimated at $35.3 billion, American consumer bank Capital One, backed by Warren Buffett, to acquire American credit card company Discover Financial Services.

According to the companies, this acquisition aims to create a global payments giant.

The transaction, which is anticipated to be subject to rigorous antitrust examination, would create the sixth-largest bank in the country by assets and a massive credit card company that would take on competitors JPMorgan Chase and Citigroup.

Compared to competitors Visa, Mastercard, and American Express, Discover is still far smaller, even with a network that covers 200 countries and territories.

The companies said in a statement that the Discover network can now more effectively compete with the biggest payment networks thanks to the scale and investment gained from this acquisition.

For every Discover share, owners will receive 1.0192 Capital One shares, which represents a 26.6% premium over Discover's Friday closing price. If a deal is reached, shareholders of Capital One will own 60% of the merged business, with shareholders of Discover holding the remaining 40%.

Baird equity research analysts noted in a note to clients that a Capital One/Discover merger would have "significant strategic merit," citing the advantages of having Capital One credit cards leverage Discover's network and the potential for cost savings that comes with increased scale.

The firms stated that they anticipate achieving pre-tax synergies of $2.7 billion in 2027, which would involve network savings and cost reduction.

At $52.2 billion, Capital One is worth more than Buffet's Berkshire Hathaway, which is its seventh-largest stakeholder with a 3.28% stake. According to Nilson, it ranked fourth by volume in the US credit card market in 2022, behind Discover, which came in sixth.