Discover Sells U.K. Card Business

Discover Financial Services(DFS Quote) is exiting the U.K. credit card business by selling its Goldfish brand to Barclays(BCS Quote).

The U.K. banking giant will pay $70 million in cash for the business, which consists of approximately 1.7 million credit cards and approximately $4 billion in gross receivables, the companies said. Barclays will integrate Goldfish into its own credit card arm, Barclaycard.

The Riverwoods, Ill.-based Discover, which was spun off from Morgan Stanley(MS Quote) in late 2006, expects to record after-tax charges between $190 million and $210 million associated with the transaction in the first quarter. The deal is expected to close by the end of June.

Discover had acquired the Goldfish brand in early 2006.

Exiting the U.K. card business "will positively impact earnings in the second quarter of 2008 and for the remainder of the year" and make capital available, Discover said.

"While we have begun to see important progress in our U.K. business, the funding and operating environment there continues to be a challenge. We have concluded that the best way to maximize shareholder value is through the sale of the Goldfish business," said Discover's CEO David Nelms. "The sale will free up capital, enhance Discover's net income and bring even sharper focus to our profitable and growing U.S. card and third-party payments businesses."

In December Discover reported a net loss for its fiscal fourth quarter of $84 million, or 18 cents a share. The loss included a non-cash charge of $279 million, or 58 cents a share ($391 million before taxes), related to the struggling Goldfish business.

Barclaycard's CEO Antony Jenkins said Discover's U.K. credit card business "has similar credit characteristics to our existing U.K. business. The combination provides an attractive opportunity to deploy our expertise across a larger number of cards and customers."

Shares of Discover recently were rising 23 cents, or 1.5%, to $16.