Discover Financial, When Buyout Speculation Just Doesn't Matter

Discover Financial Services (NYSE: DFS) has managed to avoid getting crushed and its share price is actually much higher than it was before the recession.  Shares are very close to an all-time high.  Most banks cannot claim that, not even close.  It may seem puzzling that the shares are lower on a day that a research report has the potentiality of a buyout being addressed.

Dow Jones had reported on it earlier today and Bloomberg Television has now keyed in on the issue. The research team at Susquehanna Financial Group has noted that Wells Fargo & Co. (NYSE: WFC) could be a perfect acquirer of Discover.  It even threw out the price tag of up to $23.7 billion to help Wells Fargo grow its credit card operations.

The report even goes on to say that Discovery has been the subject of takeover rumors in the past.  Still, the company’s market cap is now nearing $20 billion.  Susquehanna said that this would create the number-two credit card company in America.

Capital One Financial Corp. (NYSE: COF) is close to a 52-week high with shares still above $56.00 but the peak before the recession was just over $90.00. American Express Company (NYSE: AXP) is still only about 7% under its 52-week high with its shares at $57.25, and its shares peaked above $65 before the recession.

Unfortunately, even as the deal was listed as being at 2.7-times book value it is a hypothetical deal.   Discover shares are down almost 2.3% at $37.90 and shares got within 1% of an all-time high at $39.05 earlier today.  No one believes that a hypothetical deal is going to materialize just over a research report.  Not here, at least not for more than $20 billion.

JON C. OGG