Discover Financial Services to Acquire Diners Club International Network
Apr 7, 2008 Market Outlook
Discover Financial Services to Acquire Diners Club International Network
Deal Will Lead to Global Acceptance of Discover Network Cards
RIVERWOODS, Ill., Apr 07, 2008 (BUSINESS WIRE) — Discover Financial Services
(DFS) announced today that it has signed an agreement with Citi (C) to acquire
Diners Club International, resulting in a global payments network with increased
transaction volume and worldwide acceptance of Discover Network cards once the
networks are fully integrated.
Discover will purchase the business for $165 million. Under the terms of
agreement, Discover will acquire the Diners Club International network with more
than $30 billion per year in spend volume outside of North America; its brand and
trademarks; its employees; and agreements with 44 network licensees who issue
Diners Club cards and maintain an acceptance network consisting of more than 8
million incremental merchant and cash access locations in 185 countries
worldwide. Citi will remain a significant long-term issuer on the Diners Club
network as part of the transaction.
Discover will not issue cards or extend consumer credit in international markets
as a result of this acquisition.
“We expect this acquisition to significantly improve our competitive position by
giving us global reach and accelerating growth in our payments network revenues,”
said David Nelms, chief executive officer of Discover. “Like Discover, Diners
Club International is a pioneer that built its market position through high
quality service, superior cardholder benefits, and differentiated products and
services. One of its key strengths is the commitment of Diners Club licensees to
the Diners Club International brand in local markets. We look forward to working
with international licensees to leverage the synergies between our companies to
create greater opportunities for our cardholders, merchants and issuers as we
continue to invest in the Diners Club brand.”
Over the next two-to-three years, Discover expects to integrate both networks to
allow Discover Network cardholders to use their cards at merchants that accept
Diners Club cards around the world, and Diners Club cardholders to use their
cards on the Discover Network in North America. Participants of Discover Network
and Diners Club International licensees are expected to benefit from increased
transaction volume resulting from broader acceptance, while merchants outside of
North America will benefit from the spending of Discover Network cardholders
while traveling.
“Our strategic decision to sell the Diners Club International payments network to
Discover is consistent with Citi’s efforts to streamline its businesses to focus
on what Citi does best. For Citi, this means growing our card issuing businesses
around the world,” said Ed Eger, Head of International Cards for Citi. “At the
same time, we are excited about the opportunity to work with a long-term partner
that has the commitment and experience to expand the acceptance network of such a
highly regarded franchise. We look forward to supporting the Diners Club
International network and to ensuring a smooth transition for cardmembers and our
licensee, merchant, and client partners.”
Diners Club licensees in North America and globally are not included in this
acquisition. Diners Club cardmembers can continue to use their cards as usual and
will maintain all benefits related to their current card programs. While not
included in the transaction at this time, Diners Club assets and employees in
France are expected to be included shortly.
Diners Club International has a rich, 50-year heritage as a premium card brand
for upscale consumers, frequent travelers and corporations. Since launching the
first general purpose credit card in 1950, Diners Club has grown to attain status
as a premier global payments network. Discover, a leading credit card issuer and
electronic payment services company, has one of the most recognized brands in
U.S. financial services.
The combined company will bring together two respected brands with experienced
merchant acceptance networks that will enable cardmembers to use their cards in
more than 185 countries and territories.
The acquisition is expected to close within 90 days, subject to required
regulatory approvals and customary closing conditions.
A conference call to discuss the firm’s acquisition will be held at 8 a.m.
Central time and can be accessed by dialing 1-800-573-4842 (U.S. domestic) or
1-617-224-4327 (international), passcode 15539168. The call will be accessible as
an audio webcast through the Investor Relations section of the Web site. For
those unable to listen to the live broadcast, a replay will be available on our
Web site or by dialing 1-888-286-8010 (U.S. domestic) or 1-617-801-6888
(international), passcode 24976865, beginning approximately two hours after the
event. The replay of the conference call will be available through April 14,
2008.
About Discover Financial Services
Discover Financial Services (DFS) is a leading credit card issuer and electronic
payment services company with one of the most recognized brands in U.S. financial
services. The company operates the Discover Card, America’s cash rewards pioneer,
with more than 50 million cardmembers. Since its inception in 1986, the company
has become one of the largest card issuers in the U.S. Its Third-Party Payments
business consists of the Discover Network, with millions of merchant and cash
access locations, and PULSE, one of the nation’s leading ATM/debit networks. For
more information, visit http://www.discoverfinancial.com.
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are based upon
the current beliefs and expectations of Discover Financial Services’ management
and are subject to significant risks and uncertainties. Actual results may differ
materially from those set forth in the forward-looking statements. The following
factors, among others, could cause actual results to differ materially from those
set forth in the forward-looking statements: the actions and initiatives of
current and potential competitors; our ability to manage credit risks and
securitize our receivables at acceptable rates; changes in economic variables,
such as the number and size of personal bankruptcy filings, the rate of
unemployment and the levels of consumer confidence and consumer debt; the level
and volatility of equity prices, commodity prices and interest rates, currency
values, investments and other market indices; the availability and cost of
funding and capital; access to U.S. debt markets; the ability to increase or
sustain Discover Card usage or attract new cardmembers and introduce new products
and services; our ability to attract new merchants and maintain relationships
with current merchants; material security breaches of key systems; unforeseen and
catastrophic events; our reputation; the potential effects of technological
changes; the effect of political, economic and market conditions and geopolitical
events; unanticipated developments relating to lawsuits, investigations or
similar matters; the impact of current, pending and future legislation,
regulation and regulatory and legal actions; our ability to attract and retain
employees; the ability to protect our intellectual property; the impact of our
separation from Morgan Stanley; the impact of any potential future acquisitions;
investor sentiment; and the restrictions on our operations resulting from
indebtedness incurred during our separation from Morgan Stanley.
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