Walmart Drops Synchrony For Capital One As Credit Card Issuer

by Bamidele Ogunberu Posted on July 27th, 2018

Walmart and Capital One today announced that the companies have entered into a new, long-term credit card program agreement.

Under the terms of the agreement, Capital One will become the exclusive issuer of Walmart’s private label and co-branded credit card program in the U.S. beginning August 1, 2019.

The deal covers both credit cards that can only be used at Walmart’s website and stores, as well as co-branded cards that can be used elsewhere.

Walmart and Capital One share a common goal of transforming the way they serve customers through digitally-led innovations. This new relationship combines Walmart’s size, scale and leadership in omni-channel retailing with Capital One’s long-standing position as a technology leader within the retail financial services market. Leveraging their respective technology platforms and individual capabilities, Walmart and Capital One intend to offer highly innovative, digitally-enabled credit card products that deliver great value to customers and an exceptional cardholder experience.

Walmart will provide additional information in the coming months regarding the anticipated transition to the new card program in 2019.

Moelis & Company and Greenhill & Co. acted as financial advisers to Walmart and Morrison & Foerster served as Walmart’s legal counsel. Wachtell, Lipton, Rosen & Katz acted as legal counsel to Capital One.

The deal with Capital One for its store-branded credit card, ends Walmart’s two-decade long partnership with Synchrony Financial

Capital One shares rose 1 percent in extended trading on Thursday, while Synchrony’s shares closed down 10 percent.

Losing Walmart is a major blow to Synchrony SYF, -10.29% , the largest U.S. store-card issuer. Walmart WMT, +0.38% is one of Synchrony’s five biggest accounts, and it accounts for about 19% of Synchrony’s store-card portfolio, according to people familiar with the matter.

The switch from Synchrony to Capital One is the biggest shake-up in retail credit-card partnerships since Costco Wholesale Corp. dumped American Express Co. and moved to Citigroup Inc. in 2016. That switch is still rippling throughout the industry. Competition between card companies has intensified, especially for blue-chip partners like Walmart, and merchants are pressing their advantage to squeeze better terms out of deals.

Synchrony said strategic options for the cards program which it had with Walmart, including a possible sale, is expected to fully offset the impact to its earnings per share, according to a regulatory filing.

Synchrony also said it expects to use the majority of $2.5 billion that could come from the sales of its Walmart portfolio to buy back shares by the end of 2019.

Walmart Inc. (NYSE: WMT) has more than 11,700 stores under 65 banners in 28 countries and eCommerce websites. With fiscal year 2018 revenue of $500.3 billion, Walmart employs approximately 2.3 million associates worldwide.

Capital One Financial Corporation  (NYSE: COF) is a financial holding company whose subsidiaries, which include Capital One, N.A., and Capital One Bank (USA), N.A., had $248.2 billion in deposits and $364.0 billion in total assets as of June 30, 2018.

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Bamidele Ogunberu

Bamidele Ogunberu

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