The Mclean, Va.-based company said Thursday that it will buy ING's U.S. online banking unit for $9 billion in a cash and stock deal.
Under the terms of the deal, Netherlands-based ING Groep will receive $6.2 billion in cash and $2.8 billion in the form of Capital One shares. That will make ING the largest single shareholder in Capital One after the deal closes.
ING will also have the right to be represented by a member of Capital One's board of directors.
Capital One is best known for its portfolio of credit cards. But the company also has retail banking locations in eight states and has offered its own online banking service for about a decade.
ING Direct, based in Wilmington, Del., offers online banking services to 7.7 million customers. The company was launched in 2000 and is now the largest direct bank - a bank without a network of branches - in the country.
Capital One CEO Richard Fairbank called the deal a "game-changing transaction" that will create a "truly national franchise."
He said in a conference call following the announcement that Capital One may open branches in select markets with large numbers of ING customers. That's because local branches are "still the best way to reach customers and build deep relationships," he said.
The companies said ING Direct will keep its "orange ball" branding and use the ING Direct trademark for a transitional year.
Capital One says it's now the eighth largest bank in the United States based on domestic deposits. After the deal closes, however, it will move into the number five spot. The top four banks by that measure are Bank of America, Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup, according the research group SNL.
The sale is part of ING's restructuring plan that was filed with the European Commission in 2009. ING had to submit the plan in order to receive government support during the financial crisis. ING said the deal will not affect its ING Direct operations in Canada, Spain, Australia, France, Italy, Germany, the United Kingdom and Austria.
Capital One said it will finance the cash portion of the deal through a public equity raise of about $2 billion and debt offerings of about $3.7 billion.
The company expects to incur a charge of $210 million in acquisition costs when the deal closes late this year or in early 2012.
Capital One said it expects to save $90 million from consolidating systems and corporate staff functions. The company also expects to save $200 million annually from consolidating management of the combined deposit portfolio. The deal is expected to add to Capital One's earnings per share in 2012.
The deal is still subject to regulatory approvals in the United States and the Netherlands.