From CNBC:

Capital One’s proposed takeover of Discover Financial includes a $1.38 billion breakup fee if Discover goes with another buyer, but no fee if U.S. regulators block the deal. Capital One agrees to buy Discover for $35.3 billion in an all-stock transaction, with other bidders allowed before shareholders vote.

Breakup fees in bank deals serve to motivate successful acquisitions, as seen with AT&T paying $6 billion to T-Mobile after abandoning a 2011 takeover. Antitrust regulators may impact Capital One’s acquisition of Discover. TD Bank paid $225 million when its deal with First Horizon collapsed due to regulatory scrutiny.

Capital One CEO Richard Fairbank remains confident in the deal’s approval, despite a challenging regulatory environment. Approval is needed from the Federal Reserve, the Office of the Comptroller of the Currency, and the Justice Department, which can bloc the transaction if necessary. The deal was negotiated directly between Capital One and Discover.

Regulatory approval is a significant hurdle for Capital One’s acquisition of Discover Financial, but Fairbank is optimistic about the deal’s success. The companies have been transparent with regulators, paving the way for potential approval. Ultimately, the fate of the deal rests in the hands of U.S. banking regulators.



Read more: Capital One Discover acquisition has $1.4 billion breakup fee for another buyer