Capital One agrees to acquire fintech Brex for $5.1B
Capital One Financial Corp. agreed to acquire Brex, a financial-technology company that focuses on corporate expense management and accounting, for $5.15 billion.
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The bank plans to buy closely held Brex for roughly 50% cash and 50% stock, McLean, Virginia-based Capital One announced in a statement Thursday, along with its fourth-quarter results.
The deal would be Capital One’s biggest since its roughly $35 billion acquisition of Discover Financial Services last year, which created the biggest U.S. credit-card lender.
“Since our founding, we set out to build a payments company at the frontier of the technology revolution,” Capital One Chief Executive Officer Richard Fairbank said in a subsequent statement. “Acquiring Brex accelerates this journey, especially in the business payments marketplace.”
Shares of Capital One fell 3.1% to $227.75 in extended trading at 6:27 p.m. in New York.
Fourth-quarter net income almost doubled from a year earlier to $2.13 billion, or $3.26 a share, Capital One said. Adjusted earnings per share totaled $3.86, missing the $4.15 average estimate of analysts surveyed by Bloomberg.
Provisions for credit losses surged 57% from a year earlier to $4.14 billion.
Net interest income from credit cards soared 64% to $9.48 billion. That earnings line item faces an assault from President Donald Trump, who earlier this month demanded that banks cap interest rates at 10% for one year. This week in Davos, Switzerland, Trump said he would call on Congress to implement his proposal.
Fairbank said such a cap would make credit less available and could tip the US economy into a recession.
“A material contraction in available credit would likely cause multiple shocks throughout the economy,” he said during a conference call.
Bank of America Corp. and Citigroup Inc., meanwhile, are considering options that they hope would assuage the president, Bloomberg reported earlier Thursday.
Capital One said it expects to complete the acquisition of San Francisco-based Brex in the middle of this year and that Pedro Franceschi, its CEO, will continue to lead the business. Brex scored a peak valuation of $12.3 billion in January 2022 and considered an initial public offering last year.
“When you look into the multiples of companies similar to Brex trading in public markets right now, this is a very high premium to that,” Franceschi said in an interview after the deal was announced.
Bank of America served as Capital One’s financial advisor, and Wachtell Lipton Rosen & Katz was the bank’s legal advisor, with Baker McKenzie “providing counsel on certain foreign legal matters,” according to the second statement. Centerview Partners was Brex’s financial advisor, while the fintech received legal advice from Wilson Sonsini, Simpson Thacher and Skadden Arps.
