The UK's Barclays Bank has signed a definitive agreement to acquire the Goldfish credit card business from Discover Financial Services for around £35 million in cash.
Confirmation of the acquisition follows reports of the deal by UK tabloid newspaper The Sun.
Under the agreement, Barclays will acquire the UK card portfolio - consisting of 1.7 million Goldfish and affinity card accounts with approximately £2.0 billion of gross receivables - as well as the Goldfish brand, operating facilities; certain legal entities and staff.
The purchase price is payable in cash at closing and subject to a post-closing adjustment.
The sale of Goldfish comes after Discover - which was spun off by Morgan Stanley last year - said in December that it was writing down the value of the UK business by up to $422 million due to the "very challenging" consumer credit environment in Britain.
Morgan Stanley bought Goldfish from Lloyds TSB just two years ago for £1 billion.
In today's statement, Discover says it expects to record after-tax charges of between $190 million and $210 million in the first quarter associated with the deal. Discover says exiting the UK card business will positively impact earnings in the second quarter of 2008 and for the remainder of the year.
"While we have begun to see important progress in our UK business, the funding and operating environment there continues to be a challenge. We have concluded that the best way to maximise shareholder value is through the sale of the Goldfish business," says David Nelms, chief executive officer, Discover. "The sale will free up capital, enhance Discover's net income and bring even sharper focus to our profitable and growing US card and third-party payments businesses."
Following completion of the deal, Barclays says Goldfish will be integrated into its Barclaycard business.
"Goldfish has similar credit characteristics to our existing UK business. The combination provides an attractive opportunity to deploy our expertise across a larger number of cards and customers," says Barclaycard chief executive Antony Jenkins.
The transaction is expected to close in the first half of 2008, subject to regulatory approvals in the UK and other closing conditions.