Visa Inc. the world’s largest credit and debit card company, believes it might have to pay more than $10 billion to buy its London-based European licensee, Visa Europe Ltd, if its owners exercise their option to sell it.
Visa might issue debt or equity, or need third-party financing, to fund the purchase of Visa
Europe, it said in an annual filing with regulators.
The $10 billion price tag has been floated by Visa Inc in an SEC filing, with the company saying that it would need to access third-party financing to meet its obligations under the 285-notice period specified under the contracts.
While they share the same brand, Visa Europe and Visa Inc are separate entities, with the US business listed on the new York Stock Exchange. Visa Inc. has a call option to buy shares in the bank-owned European organisation, while Visa Europe’s members have a put option to sell them to Visa Inc.
Europe’s banks have held discussions over a possible sale of Visa Europe in the past, but have so far kept their powder dry. However, the promise of a potential $10 billion payday may entice them to once again look at their options.
Visa Inc is required to assess the fair value of the put option on the price of Visa Europe quarterly, an exercise which the company says “could adversely affect our ability to raise capital and increase any associated costs”.
In the filing, Visa Inc says an acquisition could also have an adverse impact on the company’s operations as it would have to act swiftly to integrate Visa Europe’s business and systems into its global operations.
“If we cannot do so quickly and cost-effectively, the integration could divert the time and resources of senior management and other key resources, disrupt our current operations and adversely affect our results of operations,” states the company. “In addition, we would become subject to any ongoing or future regulatory disputes as a result of EU regulations that govern the operations of Visa Europe. We may also be required to assume any ongoing or future litigation involving Visa Europe.”
Visa Europe is owned and operated by more than 3,700 European financial institutions.