Visa Inc agrees EUR21.2 billion deal for Visa Europe

Andrew Poole

tribbleagency.com

16:36 | Thursday, Nov 05, 2015

The company reported net income of $1.51 billion for the period ending September 30, up from $1.07 billion in the same period a year ago. A strengthening US dollar has crimped earnings overseas, and the company expects that currency will have a negative impact of 3 per cent on revenue growth next year. After the session commenced at $78.03, the stock reached the higher end at $78.18 while it hit a low of $77.055.

Visa also sees strong growth potential in mobile payment solutions in Europe.

Lloyds Banking Group said it expected a pretax gain of about $462 million when the deal closes, while payment services provider Worldpay Group predicted it would receive about $1.38 billion from the deal.

The transaction traces its roots back to the split in 2007, when Visa Europe was granted an option that, if exercised, would trigger its sale back to Visa.

Most of the network's units then merged to form Visa, leaving Visa Europe as a separate company.

Visa's management revealed, during the earnings call, that 500 million Visa cards were issued across Europe. It positions the combined Visa to create value through increased scale, efficiencies realized by the integration of both businesses, and benefits related to Visa Europe's transition from an association to a for-profit enterprise.

Visa probably will raise prices after a deal is completed and it could be disruptive as the U.S. company integrates operations with its European counterpart, Hickey said before the deal was announced.

Visa stated the transaction would afford a significant growth opportunity as mobile payments continue to grow with the increasing availability of Near Field Communication technology and new mobile payment platforms.

The deal could boost earnings by as much as 5 per cent, according to estimates from Donald Fandetti, a Citigroup Inc analyst.

Mr. Scharf said that Visa Inc. will pump resources into the European operations, which have been widely viewed as underinvested.

The deal will finally give Visa meaningful exposure to Europe, which was considered a competitive disadvantage.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review. The upfront consideration comprises €11.5 billion of cash and preferred stock convertible into Visa Inc. class A common stock valued at €5 billion. Meanwhile profit grew by 44% YoY to 62 cents per share.

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