RIVERWOODS, Ill.--(BUSINESS WIRE)--Oct. 27, 2008--Discover
Financial Services (NYSE: DFS) said today that it has reached an
agreement with Visa Inc. and MasterCard Inc. in the settlement of a
lawsuit seeking damages for practices that suppressed third-party
issuing on the Discover Network and the acceptance of its cards.
Under the terms of the settlement agreement, Discover is expected
to receive up to $2.75 billion in the settlement of its lawsuit
against Visa and MasterCard. Discover will receive approximately $862
million of the settlement in the current fiscal quarter and up to
approximately $472 million per quarter in 2009. Payments will be
reported as revenue in each quarter as earned and will be reflected in
earnings per share on an after-tax basis. The quarterly payments are
contingent upon Discover achieving certain performance levels in
network sales volume, which the company believes it will achieve based
upon past performance. The settlement agreement is subject to the
approval of Visa's Class B shareholders.
"This settlement will enable Discover to further strengthen its
capital base in this challenging economy and also will support
continued investment in growing our business, including broadening
global acceptance, expanding network volume and growing our deposit
franchise," said David Nelms, chief executive officer of Discover.
Discover filed its damages suit in October 2004 following the
conclusion of the Department of Justice lawsuit, which determined that
the rules of Visa and MasterCard barring banks from issuing cards on
the Discover Network violated antitrust laws.
Since 2004, Discover more than doubled its network volume; signed
numerous third-party credit and debit issuers; became a leading
PIN/POS debit network through the acquisition of PULSE; signed
merchant acceptance deals with acquirers representing 98 percent of
U.S. merchant card volume; and increased international acceptance
through strategic alliances and the acquisition of Diners Club
International.
At the time of the 2007 spin-off of Discover by Morgan Stanley,
both parties entered into an agreement governing the manner in which
the antitrust case against Visa and MasterCard was to be pursued and
settled and how proceeds of the litigation were to be shared. Discover
has notified Morgan Stanley that Morgan Stanley is in breach of the
agreement and the amount of Morgan Stanley's special dividend is a
matter of dispute.
Conference Call and Webcast Information
A conference call to discuss this announcement, as well as the
impact of elevated funding costs on Discover's fourth quarter, will be
held Oct. 28, 2008, at 7:30 a.m. Central time. The general public is
invited to listen to the call by dialing 866-362-4820 (U.S. domestic)
or 617-597-5345 (international), passcode 13604805, or via a live
audio webcast through the Investor Relations section of the Web site,
www.discoverfinancial.com. For those unable to listen to the live
broadcast, a replay will be available on our Web site or by dialing
888-286-8010 (U.S. domestic) or 617-801-6888 (international), passcode
78817365, beginning approximately two hours after the event. The
replay of the conference call will be available through Nov. 28, 2008.
About Discover Financial Services
Discover Financial Services (NYSE: 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. Since its inception in
1986, the company has become one of the largest card issuers in the
United States. Its payments businesses consist of the Discover
Network, with millions of merchant and cash access locations; PULSE,
one of the nation's leading ATM/debit networks; and Diners Club
International, a global payments network with acceptance in 185
countries and territories. For more information, visit
www.discoverfinancial.com.
Forward-Looking Statements
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. These
forward-looking statements speak only as of the date of this press
release, and there is no undertaking to update or revise them as more
information becomes available. 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 availability of consumer credit, the
housing market, energy costs, 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, other market fluctuations and other market indices; the
availability and cost of funding and capital; access to U.S. debt and
deposit markets; losses in our investment portfolio; 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; our
ability to successfully integrate the Diners Club International
network and maintain relationships with network participants; 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,
including the Federal Reserve Board's proposed amendments limiting or
modifying certain credit card practices; our ability to attract and
retain employees; the ability to protect our intellectual property;
the impact of any potential future acquisitions; investor sentiment;
and the restrictions on our operations resulting from indebtedness
incurred related to our spin off in 2007.
Additional factors that could cause Discover Financial Services'
results to differ materially from those described in the
forward-looking statements can be found in the company's annual report
on Form 10-K for the year ended November 30, 2007, and the company's
quarterly report on Form 10-Q for the quarter ended May 31, 2008,
filed with the SEC and available at the SEC's internet site
(http://www.sec.gov).
CONTACT: Discover Financial Services
Media:
Leslie Sutton
224-405-3965
Jon Drummond
224-405-1888
or
Investors:
Craig Streem
224-405-3575
SOURCE: Discover Financial Services