Visa to buy European counterpart for $23bn

January 2016 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Visa Inc, the world’s largest credit card and debit card announced its agreement to acquire former subsidiary Visa Europe in a deal worth up to $23bn in cash and stock.

According to a joint statement, Visa will pay $18.2bn up front and a potential additional payout of $5.2bn four years after the deal closes. The deal structure has been arranged to provide Visa Europe with an incentive to meet estimated revenue targets.

The boards of both companies have unanimously agreed to the terms of the transaction, though it is still subject to the usual regulatory approvals. Both firms expect the deal to close in the third quarter of 2016. In order to finance the deal, Visa has announced plans to issue $15bn to $16bn in new debt, according to the statement.

The amalgamation of Visa and Visa Europe comes just five years after the two companies first separated; however, both firms have been subject to considerable speculation about a reunification since the initial parting of the ways in 2007. Visa Inc and Visa Europe, a cooperative of European banks with more than 500 million cards, were formerly part of a global bank-owned network until 2007. Most of the units merged to form Visa Inc, which went public in 2008. Visa Europe was left as a separate entity.

“We are very excited about unifying Visa into a single global company with unmatched scale, technology and services,” said Charles W. Scharf, chief executive of Visa. “This transaction is beneficial for financial institutions, acquirers, merchants, cardholders, and other partners, as well as for our employees and shareholders. The Visa Europe team has done a tremendous job building a leading payments system that is trusted and respected across Europe, and together we will bring the power of electronic payments to more people, in more places, than ever before.”

The reintegration of Visa Europe into its former parent company will provide a welcome fillip for Visa, giving the company access to the lucrative European market, an area it has neglected in recent years. Visa Europe is the largest card network in Europe, issuing over 500 million cards via 3000 financial partners in 38 countries. In 2014, Visa Europe processed payments in excess of $2.2 trillion from 35 billion transactions. Visa Inc’s card accounts exceed 2.3 billion and in 2014 the company processed 82 billion transactions worth around $4.7 trillion.

Re-entry into the European market also offers a number of significant opportunities to Visa, such as the rising popularity of contactless payments. Though cash and cheques account for around 37 percent, or $3.3 trillion, of current transactions in Europe, the region has been a strong early adopter of mobile payments. With Near Field Communications technology becoming more prevalent and Visa Inc proactively marketing new mobile partnerships and platforms, the growth of mobile payments across the continent could be significant in the years ahead. In addition, the acquisition of the European business will also strengthen the company’s position when it comes to negotiating with banking groups.

“Visa is a great global brand with a proud history and exciting future,” said Gary Hoffman, chairman of the Visa Europe board. “Visa Europe has delivered impressive results over recent years and the Board believes that it is the right time to reunite these two very healthy businesses under common management. The deal will unlock significant value for members both through the consideration paid and because the Board believes a combined Visa will be better positioned to serve the needs of customers going forward. We are confident that Visa Inc. is committed to long term investment and development of the European business.”

Richard Summerfield