The European banks that own Visa Europe may soon decide to sell the credit-card organization to US-based Visa Inc. (V) and set up a rival system in Europe, people familiar with the matter said.
A Visa Europe board meeting to discuss whether the group will exercise its option to sell the business to its U.S. counterpart is scheduled for April, the people said, cautioning that it is possible no decision will be made then.
A meeting was held in London this month among the organization’s members and advisers to discuss the possible move, which is in advanced stages of planning, one of the people said. In a sale, the business could be valued at about $3 billion, another person said.
Even though they share a brand, Visa Inc. and Visa Europe are separate entities that run their own clearance systems.
The U.S. firm is a payments technology business listed on the New York Stock Exchange, while the European organization is owned by financial institutions and operates under a license, irrevocable in perpetuity. Visa Europe is a minority stockholder in Visa Inc., and the U.S. company receives royalties from Europe.
Visa Inc. has a call option to buy shares in the European organization, while Visa Europe’s members have a put option to sell them to Visa Inc.
In its annual reports, the U.S. company identifies the put option as a risk that, if materialized, would force Visa Inc. to spend "several billion dollars or more" on the stock. The transaction would require Visa Inc. to borrow funds or sell stock, and could reduce its net profit. The exact value of the deal will be determined using a formula based on projected financials of both Visa Inc. and Visa Europe.
A spokesman for Visa Europe said it wouldn’t "comment on speculation."
The members believe the partnership with Visa Inc. isn’t working as well as a system of their own would, with European financial regulation complicating the relationship further, while the shared brand creates problems with the identity of the card products the banks are selling in Europe, one of the people said.
Among the risks Visa Inc. has identified should Visa Europe exercise the put option is a difficulty in integrating the European business and systems into the U.S. company’s existing operations.
"In addition, we would become subject to the many regulations of the European Union that govern the operations of Visa Europe, including any regulatory disputes," Visa Inc. said in its annual report last year.
A spokesman for the Foster City, Calif.-based company declined to comment specifically on the possibility Visa Europe may be put up for sale and said: "We have a close and productive working relationship with Visa Europe."
Visa Inc. has a market value of more than $100 billion. Visa Europe doesn’t trade publicly.
Visa Europe has been a separate entity from Visa Inc. since the U.S.-based company revamped its corporate structure in 2007 leading up to its initial public offering in 2008. Previously, Visa was set up as five separate operating units that focused on different regions. Under the restructuring, all of those units were rolled in to the newly formed Visa Inc. except for Visa Europe, which opted to remain a standalone, bank-owned association.
Charles Scharf, a former J.P. Morgan Chase & Co. executive who took over as chief executive of Visa Inc. in November, told analysts recently that the U.S. company has a close working relationship with Visa Europe but noted the companies’ separate structures is less than ideal.
"I’ve spent some time with some of our big global customers and the feedback is [the relationship] works well," Mr. Scharf said during a conference call in February.
"Would you design a company like this? No, but it’s a fact of life," Mr. Scharf said.
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