Discover Buys Diners? International Network

Discover Financial Services entered the international card market announcing today it will purchase the network and ancillary products outside of North America of venerable Diners Club International for $165 million from Citigroup Inc. The deal is expected to close within 90 days. 

Discover will buy the portions outside of the U.S. and Canada of Diner’s network, including its brand and trademarks, its staff, and agreements with 44 network licensees who issue Diners Club cards and maintain its acceptance network of more than 8 million merchant and cash access locations in 185 countries worldwide.

“This is an important deal for us. We look forward to working with all our partners in the next 90 day,” David Nelms, Discover CEO, said in a conference call with analysts this morning. “This allows us to compete on the global stage as a company.”

The dealmakers were careful to note that this was not an outright purchase of Diners by Discover. Citi will continue to issue Diners Club cards; Discover will not issue cards or extend consumer credit in international markets. Further, Diners’ cards in North America will be processed over the MasterCard Inc. network for as long as two years until they are transitioned over to Discover’s network.

Discover and Citi did not disclose the number of cards issued in North America or annual spend on those cards.

Despite the caveats, the deal could add considerable international heft to Discover’s processing network with Diners’ cardholders spending more than $30 billion per year outside of North America, according to a Discover press release. 

Discover’s third-party network processed volume of $26.3 billion in its first fiscal quarter of 2008 ending Feb. 29, up nearly 24 percent from $21.2 billion in the same period a year ago.

Diners Club cardholders will be able to use their cards where Discover is accepted, and Discover cardholders will be able to use those cards where Diners is accepted. 

Diners is one of the pioneers of the card business, launching the first general purpose credit card more than 50 years ago.

A Citi executive said in a statement that it sold Diners to “streamline its businesses to focus on what Citi does best … growing our card business around the world." The executive called Discover “a long-term partner that has the commitment and experience to expand the acceptance network of such a highly regarded franchise.”