Visa Inc is rumoured to be in early-stage talks to buy its former European subsidiary in a deal that could be worth as much as $20bn, people familiar with the matter said on Friday.
The world’s largest electronic payments company has tried buying Visa Europe before but
failed to reach an agreement with the more than 3,000 banks that control it.
A person familiar with the matter stressed that the talks were at a preliminary stage and there was no certainty that an agreement could be reached – reports The FT .
The two sides are still discussing how to hammer out a deal and the divergence over the pricing remains wide, said one person.
The range being discussed is $15bn to $20bn, according to Bloomberg News, which first reported the talks between the two companies.
Visa Europe has a put option, which can be exercised at any time, and requires the US company to purchase it at an agreed multiple of earnings within 285 days. Meanwhile, Visa Inc has a call option, enabling it to purchase Visa Europe if the company’s performance declines and hits certain thresholds, although the US group describes that eventuality as “remote”.
In a filing in April, Visa said: “Given current economic conditions, the purchase price under the terms of the put option would likely be in excess of $10bn. We may need to obtain third-party financing, either by borrowing funds or by undertaking a subsequent equity offering in order to fund this payment.
“The amount of this potential obligation could vary dramatically based on, among other things, Visa Europe’s adjusted sustainable income and our P/E ratio, in each case, as negotiated at the time the put option is exercised.” The put option provides for an arbitration process if the two sides cannot agree on the price.
In February, Charlie Scharf, chief executive of Visa, was asked about the likelihood of a deal. “I have no idea,” he said. “We’ve got an extraordinarily close day-to-day working relationship with Visa Europe because we share the same brand, we share global customers. We’re working probably more closely than we ever have. So in the marketplace, we do appear as one company.”
He added: “Relative to the fact that we are two separate entities, they need 80 per cent of their board to actually vote to put. And I’m not on their board. I don’t sit there. So I don’t know the dynamics. And they’ll make that decision and we’ll know when they make the decision. And until that point, it’s all speculation.”