Merger Dead on Arrival

The proposed Capital One-Discover merger has significantly less than a 5% chance of approval. The sheer volume and severity of accumulated legal, regulatory, ethical, and operational issues at both institutions make it highly improbable that regulators will greenlight this deal. Here's a comprehensive breakdown:

Capital One:

* CEO Insider Trading Fine: CEO Rich Fairbanks was fined by the SEC for insider trading, raising serious questions about his ethical leadership and the "tone at the top" of the organization. This erodes trust and suggests a potentially problematic corporate culture.
* CFPB Lawsuit: Allegations of systemic deception, misleading consumers about interest rates on savings accounts. This is a major regulatory red flag and suggests a pattern of potentially illegal behavior.
* PCI Non-Compliance: Allegations of not being PCI DSS compliant, a critical security standard, especially problematic given Discover's role in establishing PCI DSS. This raises serious concerns about data security and risk management.
* Toxic Workplace Culture: Allegations of "stack ranking" employees, leading to harassment, and specifically targeting employees with disabilities. This points to a deeply flawed and potentially discriminatory corporate culture.
* Lack of AML Program: Allegations of not having an adequate Anti-Money Laundering program, potentially facilitating financial crime and violating federal regulations.
* Operational Failures (Outage): Recent system outages impacting customer access raise concerns about the reliability and resilience of their technology infrastructure.
* Predatory Lending Practices: Accusations of super usury lending, targeting vulnerable populations with high-interest credit cards, and aggressively pursuing legal action against those who default.

Discover:

* Merchant Overcharging: Allegations of overcharging businesses for payment processing, leading to lawsuits and damaging their reputation with merchants.
* Discrimination Lawsuits: Multiple lawsuits alleging age, gender, and race discrimination, suggesting systemic problems with equal opportunity and workplace culture.
* Unsafe Banking Practices (FDIC): FDIC findings of unsafe banking practices, including failure to establish a compliance management system.
* Illegal Student Loan Servicing (CFPB): CFPB findings of misleading borrowers and inflating bills, resulting in a $18.5 million settlement.
* Credit Card Misclassification: Overcharging credit card accounts by placing them in the highest price tier, with an SEC investigation ongoing and $1.2 billion set aside for settlements.
* Securities Class Action Litigation: Allegations of false or misleading statements about risk management and compliance protocols.
* FDIC Findings of Unsafe/Unsound Banking Practices: Further highlighting regulatory concerns about their operational soundness.
* Abrupt CEO Resignation: The sudden departure of the CEO raises questions about internal issues and potential instability.
* SEC Accounting Criticism: Disclosed SEC criticism of accounting practices raises concerns about transparency and financial reporting.

Combined Impact on the Merger (Overwhelmingly Negative):
The cumulative effect of these issues makes the merger virtually impossible to justify.

Regulators will be extremely concerned about:

* Combined Risk: The combined risk profile of the two companies is exceptionally high.
* Ethical and Cultural Concerns: The pattern of misconduct, discrimination, and regulatory violations suggests deep-seated ethical and cultural problems at both institutions.
* Systemic Risk: Merging two troubled companies creates a larger, potentially more unstable entity that could pose a systemic risk to the financial system.
* Public and Political Pressure: The nature of the allegations will likely generate significant public and political opposition to the merger.
* Regulatory Burden of Proof: The companies face an almost insurmountable burden of proving that this merger is in the public interest and will not harm consumers or the financial system.

In conclusion, the sheer volume and severity of the issues facing both Capital One and Discover make this merger exceedingly unlikely to be approved. The risks are simply too high, and the companies have done little to demonstrate that they are capable of operating responsibly and ethically.

Comment! It's anonymous!

19 replies (most recent on top)

@OP This aged well LOL

While working as a tech writer contractor at Discover Financial Services, I’d agree the culture was “odd” at best, and “cutthroat” at its worst. I’ve never had a manager who was new to the role speak to me in such a degrading manner. And I’m 42. I’d be the first to admit if I was at fault, but in all sincerity - it was the culture. No one knew what they were doing. And I asked questions. Discover was NOT a happy place.

Acquisition is confirmed. Fire discover employees.

https://www.wolfpopper.com/cases-investigations/capital-one-na-and-inspira-financial-trust-llc-formerly-known-as-millennium-trust-company

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Capital One, N.A. and Inspira Financial Trust LLC (formerly known as Millennium Trust Company) Consumer Litigation
Overview
Type: Current Cases

Case Number: 1:24-cv-04839

Defendant(s): Capital One, N.A. and Inspira Financial Trust, LLC

Product(s): IRA Savings Accounts

Court: United States District Court for the Northern District of Illinois

Wolf Popper is counsel to plaintiffs in a putative class action against Capital One, N.A. and Inspira Financial Trust LLC (formerly known as Millennium Trust Company). The action alleges that Capital One violated the covenant of good faith and fair dealing when it transferred the plaintiffs’ high-yield IRA savings accounts to Millennium Trust. Millennium was not a bank and had to sweep the cash to a third party to return any yield on the account. Although those banks may have paid a competitive rate to Millennium, Millennium kept all that money to itself and paid investors a rate dramatically below benchmark rates such as Capital One’s 360 Performance Savings Account. Millennium is alleged to have violated the Illinois Consumer Fraud and Deceptive Business Practices Act and the covenant of good faith and fair dealing. The action is denominated Hewitt v. Capital One, N.A. and is pending in the U.S. District Court for the Northern District of Illinois, Index No. 1:24-cv-04839.

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Phone: Philip Black - 212-451-9642
Phone: Timothy Brennan - 212-451-9616
Phone: Sasha Marseille - 212-451-9665
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Capital One 360 Savings Account Interest Rate Litigation
Overview
Type: Current Cases

Case Number: 1:24-md-3111-DJN

Class Period: Nationwide Class plus subclasses on behalf of VA, CA, TX, NY, NJ, PA, MA, IL, MD, FL, NC, GA, OR, MI, MO, NE, and DE residents. The Class is comprised of all Capital One 360 Savings accountholders since September 2019.

Product(s): Capital One 360 Savings account

Court: United States District Court for the Eastern District of Virginia

Wolf Popper LLP has been appointed as Lead Counsel and Interim Class Counsel for Plaintiffs and the putative class of Capital One 360 Savings accountholders in this multidistrict class action against Capital One, N.A. and Capital One Financial Corporation (together, “Capital One”).

In 2013, Capital One introduced the online “360 Savings” account, which Capital One consistently advertised as its “high interest” savings account for the following six years. As of September 2019, as market interest rates were increasing, Capital One paid 1.00% APY on 360 Savings. However, on or about September 16, 2019, instead of continuing to raise interest rates on 360 Savings, Capital One abruptly pulled 360 Savings from its website and furtively substituted a new account called “360 Performance Savings,” which had identical features but a higher interest rate of 1.90% APY. Capital One left all existing customers in the inferior 360 Savings account, and never informed them that 360 Performance Savings was a new, different product paying a higher interest rate. Capital One also removed references to the 360 Savings account from its website entirely, maintaining the false impression that Capital One only offered the same, single high-interest online savings account, and concealing that 360 Performance Savings had in fact replaced 360 Savings as Capital One’s “high yield” savings account going forward.

Over time, the interest rates on the two accounts diverged substantially, leaving 360 Savings customers behind. As of December 2023, the interest rate paid on the 360 Performance Savings account was 4.35% while the rate associated with the legacy 360 Savings account has stood at 0.30% since December 2020. Since Capital One did nothing to advise its legacy accountholders that they would have to switch to the new account to earn a competitive interest rate, 360 Savings accountholders across the country have lost out on interest payments Capital One should have paid them.

Plaintiffs allege that a duty of good faith and fair dealing is implied into Capital One’s account terms. Capital One breached that duty when it failed to increase the interest rate paid to 360 Savings accountholders and instead began offering a different online savings account to new customers that actually paid a high interest rate. Plaintiffs and 360 Savings accountholders were entitled to interest rates determined by Capital One’s exercise of honest and good faith discretion, commensurate with what Capital One paid on the otherwise identical 360 Performance Savings account.

In July 2024, Plaintiffs filed a Consolidated Amended Complaint, asserting breach of contract; violations of the consumer protections statutes of Virginia, California, Texas, New York, New Jersey, Pennsylvania, Massachusetts, Illinois, Maryland, Florida, North Carolina, Georgia, Oregon, Ohio, Michigan, Missouri, Nebraska, and Delaware; and claims for unjust enrichment and promissory estoppel. Plaintiffs seek monetary damages, injunctive and/or other equitable relief, declaratory relief, restitution, and/or disgorgement of profits.

On November 12, 2024, the Court denied Capital One’s motion to dismiss in substantial part, and denied Capital One’s motion to strike Plaintiffs’ jury demand. The case is proceeding through discovery. Trial is scheduled to begin with jury selection on July 18, 2025, followed by opening statements and testimony on July 21, 2025, continuing through August 8, 2025. If a class is certified, notice will be provided to class members at that time to the extent required by Rule 23 of the Federal Rules of Civil Procedure.

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Totally happening, will just write it again.

Acquisition is confirmed. Fire discover employees.

Merger will never go through even with a republican administration. The accusations are related to serious fraud and criminal misconduct. Besides it woul only lead to more stack rankings as both Capone and Discover use stack rankings to abuse their employees.

Discover/Capital One deal spread widens amid report of potential state lawsuit
Feb. 12, 2025 1:47 PM ETCapital One Financial Corporation (COF) StockDFSBy: Joshua Fineman, SA News Editor1 Comment

Play
(<1min)
The deal spread in Capital One's (NYSE:COF) planned $35 billion acquisition of Discover Financial (DFS) widened on Wednesday, amid a report about a potential state lawsuit aimed at blocking the mega transaction. The spread widened to $10.53 from $8.33 on Tuesday.

States including New York and California are considering a lawsuit to block the combination, according to traders, who cited a Capitol Forum report that circulated on Wednesday.

Bloomberg reported in October that New York Attorney General Letitia James was seeking court permission to issue subpoenas as part of an antitrust review of the deal. James said New York could be especially impacted by the transaction because Capital One (NYSE:COF) and Discover (DFS) have over $9.5 billion and $6.5 billion in credit card loans in the state.

Shares of Discover (DFS) fell 3.2% on Wednesday, while Capital One (COF) dropped 1.8%.

F% off. Merger dead.

https://www.bankingdive.com/news/capital-one-discover-merger-delay-may-19/739954/

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Dive Brief
Capital One, Discover expect 3-month delay in merger completion
Discover said it now expects the transaction to be completed by May 19, as the companies await regulatory approvals.

Published Feb. 12, 2025
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Discover sign at driveway entrance to headquarters with flowers in front.
Discover sign at headquarters in Riverwoods, Illinois in July 2024. Lynne Marek/Banking Dive
First published on Payments Dive
Dive Brief:
Discover said it now expects to finalize its proposed merger with Capital One by May 19, three months later than originally planned as the companies wait on regulators to give the deal a green light, according to a regulatory filing Monday. Initially, they expected to consummate the transaction by Feb. 19, according to the merger agreement filed with the Securities and Exchange Commission last year.
The credit card network also provided an update, in its latest filing, about ongoing lawsuits seeking to derail the merger. Discover said it considers those cases meritless.
“As a result of the closing conditions related to the requisite regulatory approvals not yet having been satisfied, the outside date under the Merger Agreement will be automatically extended to May 19, 2025,” the filing said.

Dive Insight:
Discover also reiterated in the filing that a special shareholder meeting to vote on the merger had been scheduled for next Tuesday. “The extension of the outside date is standard practice in large bank transactions and was contemplated from the outset in the original Merger Agreement,” a Capital One spokesperson said in an email when asked for comment. “We remain well-positioned to complete the acquisition in early 2025, subject to shareholder and regulatory approval.”

McLean, Virginia-based Capital One proposed the $35.3 billion acquisition of Riverwoods, Illinois-based Discover on Feb. 18, 2024.

The deal is the subject of three lawsuits seeking to block the companies from merging on the grounds that the acquisition would harm consumers by giving them fewer options, according to Discover’s filing.

“The Matters each allege that, among other things, the joint proxy statement/prospectus contains certain disclosure deficiencies and/or incomplete information regarding the Mergers,” Discover’s Monday filing said.

The New York attorney general’s office is also probing the proposed acquisition to determine the impact on consumers.

Capital One and Discover were adding disclosures to previous proxy filings to “to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing,” according to Monday’s filing.

One additional disclosure, for example, indicated Discover would establish a cash retention program for executives affected by the merger.

When asked what regulatory approvals are still needed, a Discover spokesperson referred to a Dec. 19 news release that said the Office of the Delaware State Bank Commissioner approved the deal, but the companies were still waiting for sign-off from the Federal Reserve and the Office of the Comptroller of the Currency.

Spokespeople for the two federal regulatory agencies did not respond to requests for comment.

Critics argue — among other things — that the merger will hurt low-income borrowers by giving the combined company a significant chunk of the market for subprime credit cards, although Capital One and Discover insist they won’t raise prices for those cardholders.

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Discover and Capital One plan merger extension amid lawsuits
Investing.com
Editor
Ahmed Abdulazez Abdulkadir
Published 02/10/2025, 06:41 AM
View all comments (0)

DFS

Discover Financial Services (NYSE:DFS) and Capital One Financial Corporation (NYSE:COF) have agreed to extend the deadline for their proposed merger to May 19, 2025, in light of ongoing litigation and the need to secure regulatory approvals. This extension was disclosed in a recent SEC filing by Discover.

According to InvestingPro data, Discover enters this merger from a position of strength, with a market capitalization of $50.19 billion and an impressive 86.78% return over the past year.

The merger, initially announced on February 19, 2024, involves a two-step process where Discover will first merge with a Capital One subsidiary, followed by a merger into Capital One itself. Concurrently, Discover Bank will merge with Capital One's national bank subsidiary.

Despite unanimous board approval from both companies, the merger has faced legal challenges. Three lawsuits have been filed against Discover and Capital One, alleging deficiencies in the joint proxy statement/prospectus provided to stockholders. The companies maintain that the claims are without merit and the supplemental disclosures made in the SEC filing are not legally necessary.

In anticipation of the merger, special stockholder meetings are scheduled for February 18, 2025, where stockholders will vote on the merger-related proposals. The recent SEC filing includes supplemental disclosures to the joint proxy statement/prospectus, amending and restating certain financial analyses and forecasts used by financial advisors.

For investors seeking deeper insights, InvestingPro offers comprehensive analysis through its Pro Research Report, available for Discover and 1,400+ other US stocks, providing essential metrics and expert analysis for informed decision-making.

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The filing also contains forward-looking statements regarding expected business and financial performance, highlighting potential risks and uncertainties that could affect actual results. These include legislative and regulatory changes, competitive actions, economic conditions, and the outcome of the proposed merger, among others.

The merger is subject to approval by stockholders and regulatory bodies. The extension of the merger deadline allows more time for these approvals to be obtained and for the resolution of the pending lawsuits.

In other recent news, Discover Financial Services has been the subject of significant attention following its recent earnings report and subsequent analyst outlook. The financial services company reported an adjusted earnings per share (EPS) of $5.11, significantly outperforming the consensus estimate of $3.24 and generating revenue of $4.76 billion, exceeding the anticipated $4.41 billion. Barclays (LON:BARC) updated its outlook on Discover Financial, raising its price target from $186.00 to $209.00 while maintaining an Overweight rating on the company's stock. This adjustment reflects the firm's confidence in Discover Financial's performance and management's guidance for the future.

Furthermore, Barclays analyst Terry Ma attributed the better-than-expected results to several factors, including a significant beat on provisions, a modest outperformance in net interest income (NII), and a slight increase in other income. These were partially offset by higher-than-anticipated non-interest expenses. In terms of credit performance, the 30+ day card delinquency rate stood at 3.84%, representing a year-over-year improvement and marking the first year-over-year improvement in card delinquencies since March 2022.

Discover Financial also revised its 2024 loan growth expectations to low to mid-single digits and anticipates net interest margins between 11.2% and 11.4%. The company is preparing for its merger with Capital One, projecting approximately $125 million in merger and integration costs for 2024.

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This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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The Eagles won the Super Bowl!

I hope it falls through just going to be more work for no extra pay 🤡

Totally still happening!

This timeline adds more detail to the severity of the situation, but what's particularly striking is something that wasn't obvious at first: the timing alignment between these issues. Let me break it down:

Timeline of Catastrophe:

Early January 2025: CFPB sues over $2 billion in stolen interest earnings
January 15: System issues begin
January 16-18: Major outage during mid-month payroll period
January 22: Class action lawsuit filed
February: System still not fully fixed, data corruption revealed
Meanwhile: Actively pursuing merger while all this unfolds

The most damning part is that they're facing simultaneous legal actions for:

Deliberately cheating customers ($2B CFPB case)
Operational negligence (class action)
System failure (ongoing crisis)

And what makes it worse is that executives are still telling employees the merger is "guaranteed" while:

Customers can't access basic banking services
Manual transaction processing is ongoing
Data corruption issues remain unresolved
FIS hardware repairs are still pending
Multiple investigations are underway

You simply can't recover from this level of combined intentional fraud AND operational incompetence. The $2 billion interest scheme shows intent to defraud, while the system collapse shows inability to operate safely. Together, they make an overwhelming case for severe regulatory action.

This isn't just about fines anymore - this is potentially about fundamental changes to how Capital One is allowed to operate, if at all.

Absolutely dead. This operational catastrophe is a textbook example of why regulators exist - to prevent the creation of larger, potentially unstable financial institutions that could harm millions of customers.

The scope of this failure is breathtaking:

Multi-week core banking system failure
Data corruption in mainframe systems
Staff reduced to manual transaction processing
Hardware repairs still pending
Customers unable to access basic banking services

When you combine this with Capital One's other recent issues (the $2 billion CFPB lawsuit over savings account interest rates, PCI compliance issues, etc.) and Discover's problems (SEC investigations, FDIC findings, etc.), there's zero chance regulators would approve this merger.

The real question now shifts to whether Capital One faces additional regulatory actions over this crisis. A failure of this magnitude, affecting core banking functions and causing widespread consumer harm, typically attracts serious regulatory scrutiny on its own. The manual processing of transactions also creates huge risks for errors and compliance issues.

Between the class action lawsuit, potential regulatory investigations, and the sheer scale of customer impact, Capital One will likely be focused on survival rather than merger ambitions for the foreseeable future.

When’s the last time the government has work in this regard? Totally happening.

Completely done.

https://topclassactions.com/capital-one-class-action-lawsuit-and-settlement-news/capital-one-class-action-alleges-customers-locked-out-of-accounts-for-days/

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Capital One class action alleges customers locked out of accounts for days
Edited by: Jessy Edwards | January 31, 2025
Category: Banking News
Follow Article
Close up of Capital One Bank signage, representing the Capital One class action.
(Photo Credit: mm7/Shutterstock)
Capital One service disruption class action lawsuit overview:
Who: Plaintiff Daniel Zepeda filed a class action lawsuit against Capital One.
Why: Zepeda claims Capital One left thousands of customers unable to access their bank accounts, process payments or receive direct deposits for multiple days in January.
Where: The Capital One service disruption class action was filed in Virginia federal court.

A new class action lawsuit claims Capital One left thousands of its customers unable to access their bank accounts, process payments or receive direct deposits for multiple days in January.

Plaintiff Daniel Zepeda argues in a Jan. 22 complaint that Capital One’s alleged negligence, breach of contract and unlawful conduct left its customers unable to access their funds and deprived them of the ability to purchase essential items such as food, clothing and shelter.

Zepeda wants to represent a nationwide class of consumers who held a Capital One account and were denied access to their accounts or funds starting Jan. 15.

Zepeda claims Capital One experienced an outage on Jan. 16 that left its customers unable to access their bank accounts, process payments or receive direct deposits through Jan. 18, which he argues coincided with the mid-month pay period.

“As a direct and proximate result of the actions described above, Plaintiff and members of the proposed classes have been damaged,” the Capital One service disruption lawsuit says.

Capital One class action claims customers unable to access funds caused ‘significant hardship’
Zepeda argues that, while the system was down, Capital One customers were unable to access their funds, which he claims caused them significant hardship and left them struggling to pay for essential needs such as food, rent, electricity and gas.

“Additionally, the inability to pay household bills led to the accrual of late fees, further compounding the financial strain,” the Capital One class action says.

Zepeda claims Capital One is guilty of breach of contract, negligence, conversion and unjust enrichment and of violating California’s Consumer Legal Remedies Act and Unfair Competition Law.

The plaintiff demands a jury trial and requests declaratory and injunctive relief and an award of actual damages, restitution and interest for late payment for himself and all class members.

Earlier this month, the Consumer Financial Protection Bureau filed a lawsuit against Capital One over claims the company cheated consumers out of more than $2 billion in potential interest earnings on their savings accounts.

Were you unable to access your Capital One account in January? Let us know in the comments.

The plaintiff is represented by Glenn Chappell of Tycko & Zavareei LLP.

The Capital One class action lawsuit is Daniel Zepeda v. Capital One Financial Corp., et al., Case No. 1:25-cv-00114, in the U.S. District Court for the Eastern District of Virginia.

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199 thoughts on
Capital One class action alleges customers locked out of accounts for days
Noelle Heady says:
February 3, 2025 at 1:11 pm
That was the worst week ever! My car payment and other bills were due and all I could do everyday was tell them I’m still waiting on my direct deposit..I had no money, no gas, u stalked the online banking all day just to see the same message that they were working on it..My Mother who is also a Capital One customer called me 3-4 times in a day asking did my money arrive yet because hers hadn’t..Capital One caused a lot of stress, late fees, and confusion with thier negligence..It’s strange who it happened after they were accused of cheating people out of interest…

Reply
Leslie G-y says:
February 3, 2025 at 12:47 pm
Yes, I was also affected by this issue. I kept receiving updates saying the problem would be fixed shortly but it was not fixed shortly.

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Sharon says:
February 3, 2025 at 1:03 pm
Yes I was locked out .I wasn’t able to receive my paycheck Thursday 18 th until the late Monday21st which makes it do difficult,and was not able to buy food ,gas,etc

Reply
James Mathers says:
February 3, 2025 at 12:41 pm
I was also affected, as I could not make bill payments while capitol 1 reported me 39days late for their mistake. I was unable to withdraw cash, and paychecks did not post properly.

Reply
Arianne Hilson says:
February 3, 2025 at 12:41 pm
I too was affected. It’s sad

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James Mathers says:
February 3, 2025 at 12:40 pm
I was also affected, as I could not make bill payments while capitol 1 reported me 39days late for their mistake. I was unable to withdraw cash, and paychecks did not post properly.

Reply
Delia says:
February 3, 2025 at 11:53 am
I was also affected by the Capitol one negligence and unable to obtain fuel, food and pay bills .

Reply
Del says:
February 3, 2025 at 11:53 am
I was also affected by the Capitol one negligence and unable to obtain fuel, food and pay bills .

Reply
Amanda Pierce says:
February 3, 2025 at 11:24 am
I am a single mother of 3 and did not get my paycheck when I should have because of Capital Ones negligence. I love paycheck to paycheck and plan meals accordingly. I needed my check when I was supposed to so I could get the next round of food and feed my children. I had to sit on hold for hours on end without any actual updates or help to make the situation right. Instead, while I was crying and pleading for them for help, I was told the line was being recorded…not once did I step out of line while talking to them. Was i frustrated? Yes. Was I crying? Completely. This was completely unacceptable and other than reversing late fees with their credit cards, there has been nothing from the company. They are blaming their 3rd party for the issues. They aren’t even taking responsibility.

Reply
ShayDarian S. says:
February 3, 2025 at 11:05 am
I, also, was affected by the outage experienced on 1/16. That date, this year, was my exact pay day and the day I had expected to be able to pay my portion of rent and other bills. My husband works from home, and gets paid bi monthly, we were left without even any money to put gasoline in our vehicle to be able to get to my job. FOR DAYS!!! I used to praise Capital One for it’s excellent services, wonderful customer support and easy UI in the app and on desktop. This last year has made me change my mind and as soon as my updated driver’s license gets here I’ll be cancelling my account and going with an actual, physical real bank. Not being able to buy food for our kids and having to explain that to them is embarrassing!!! This country makes it hard enough for me to be able to not be ashamed of my financial situation. I’m not proud to be a capital one customer anymore. I can no longer trust that capital one, among all of the other issues they’ve had, will actually get my check to me on time. I can’t afford to risk it.

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Like an asset cap by the Federal Reserve will be in place to put Capone and Discover into straitjacket, rather than rewarding them with a merger.

If they think the new republican administration is more merger friendly to businesses they are very wrong. The DOJ who is one of the regulators who approves mergers has sued HPE to block it from buying Juniper networks, because it's anti- competitive and creates a monopoly.

https://www.reuters.com/markets/deals/us-doj-sues-block-hewlett-packard-enterprises-14-bln-juniper-deal-2025-01-30/

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US DOJ sues to block Hewlett Packard Enterprise's $14 billion Juniper deal
By Akash Sriram
January 30, 20252:53 PM PSTUpdated 3 days ago

Illustration shows Hewlett Packard Enterprise logo
Figurines with computers and smartphones are seen in front of Hewlett Packard Enterprise logo in this illustration taken, February 19, 2024. REUTERS/Dado Ruvic/Illustration Purchase Licensing Rights, opens new tab
Summary
Companies
DOJ sues to block $14 bln deal citing harm to competition
HPE, Juniper announced all-cash deal last year
Companies say will defend the deal
Jan 30 (Reuters) - The U.S. Department of Justice has sued to block Hewlett Packard Enterprise's (HPE.N), opens new tab $14 billion deal to acquire networking gear maker Juniper Networks (JNPR.N), opens new tab, arguing that it would stifle competition, according to a complaint filed on Thursday.
Shares of both the server maker and Juniper Networks closed about 2% lower. The antitrust lawsuit marks the first since President Donald Trump took office last week.
00:07
CIO says he would be 'surprised' if tariffs stay in place

The DOJ argued that the acquisition would eliminate competition and would lead to only two companies — Cisco Systems (CSCO.O), opens new tab and HPE — controlling more than 70% of the U.S. market for networking equipment.
More than a year ago, the server maker said that it would buy Juniper Networks for $14 billion in an all-cash deal, as it looks to spruce up its artificial intelligence offerings.
"The DOJ's claim that the WLAN (Wireless Local Area Network) market is composed of three primary players is substantially disconnected from market realities," the companies said in a joint statement.
The firms added that they would defend the deal, arguing that the acquisition will bring together two complementary networking offerings to better compete with global incumbent players.
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"Juniper has also introduced innovative tools that have materially decreased the cost of operating a wireless network for many customers. This competitive pressure has forced HPE to discount its offerings and invest in its own innovation," the DOJ said in its complaint.
Stiff competition from Juniper forced HPE to sell its products at a discount and spend to introduce new features under the "Beat Mist" campaign, named after the networking gear company's rival product, the DOJ wrote.
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"HPE and Juniper will undergo its pretrial and trial processes over the next about 8 months prior to the absolute walk-away date in October – which we think gives suffice time for a trial to commence," Evercore ISI analyst Amit Daryanani said.
UK's Competition and Markets authority and the European Union have cleared the deal.
Get the latest news and expert analysis about the state of the global economy with the Reuters Econ World newsletter. Sign up here.
Reporting by Akash Sriram in Bengaluru; Editing by Alan Barona

Our Standards: The Thomson Reuters Trust Principles., opens new tab

Thread regarding Capital One layoffs

Merger Dead on Arrival

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