Capital One to acquire corporate card provider Brex in $5.15B deal – News

Capital One Financial Corp. said today it’s going to buy the financial services and payments startup Brex Inc. in a deal valued at $5.15 billion, the latest blockbuster acquisition under its Chief Executive Richard Fairbank.

The acquisition, revealed during Capital One’s fourth-quarter earnings report today, will consist of 50% cash and 50% stock, and is expected to close before the end of the second quarter, officials said.

Fairbank said in a statement that his ambition is to build a payments company that sits at the frontier of the technology revolution. “Acquiring Brex accelerates this journey, especially in the business payments marketplace,” he explained.

Privately held Brex was founded in 2017 and specializes in financial services used by enterprises to administer corporate credit cards, expenses and rewards. The company primarily caters to startups and other businesses that face challenges in obtaining corporate cards from traditional providers such as American Express Co., which prefers to deal with organizations that have healthier finances. Some of Brex’s biggest customers include TikTok’s parent company ByteDance Ltd., Robinhood Financial LLC and Intel Corp.

Brex reportedly oversees almost $13 billion in deposits that are held by money-market funds and private banks.

Capital One is making the acquisition at a crucial juncture in the financial services industry, when fintech startups and cryptocurrency payments firms are increasingly siphoning business away from traditional banks. Some financial institutions have opted to partner with these new players in an effort to remain competitive, encouraged by U.S. President Donald Trump’s pro-crypto statements and policies.

The deal comes just 11 months after Capital One spent $35 billion to acquire the payments network Discover Financial. That acquisition vastly expanded its customer base and gave it possession of one of the only payment networks that has the scale to rival Visa and Mastercard.

Fairbank said Brex stands out for pioneering the combination of banking, corporate cards and spend management software, adding that it has “taken the rarest of journeys for a fintech, building a vertically integrated platform from the bottom of the tech stack to the top.” The startup became one of the tech industry’s youngest unicorns in 2018, reaching a $1 billion-plus valuation less than a year after its founding. At the time, it benefited from a period of low interest rates, and it was later boosted by COVID-19 pandemic-induced growth, which helped accelerate its valuation to more than $12 billion by 2022.

Brex grew further in 2023 when it was boosted by an influx of deposits from technology companies in the wake of Silicon Valley Bank’s collapse, but its fortunes have declined since then. The deal values it at less than half its peak valuation, with Brex struggling with lower demand due to higher interest rates in the last couple of years.

Nonetheless, Fairbank told CNBC in an interview that he’s convinced that Brex’s business model will be successful in future. He said Brex’s technology, combined with Capital One’s reach and resources, would help it to scale much faster than it could as a standalone entity.

Photo: Capital One