Visa Plans to Repurchase Visa Europe

Posted on by Andrew Smith

On Monday, November 2, Visa announced its plans to acquire its former European Unit, Visa Europe Ltd., for as much as $23.3 billion.1 The main objectives of the deal are to increase Visa’s international reach and to compete with MasterCard, its main competitor, who is already integrated in Europe.2

The two companies were previously one entity, but split in 2007 prior to Visa’s initial public offering in the United States.3 Since the split, over 3,000 European banks now own Visa Europe.4 The European company has operated under a licensing agreement with Visa, managing roughly 500 million accounts and processing over 16 billion transactions in just 2014 alone.5

Following Visa Inc.’s IPO in the U.S., Visa Europe was given a put option that would allow it to force a repurchase by the parent company6 In early 2013, the European banks that own Visa Europe considered using the put option to sell their shares in the company7 Visa Europe did not have complete control of its own destiny, however; while its put option gave it the right to sell at its own discretion, the American parent also held a call option, which gave it the power to purchase Visa Europe8

Though Visa Europe declined to exercise its put option in 2013, by early 2015 rumors of a reunion emerged once more.9 In its third quarter earnings report, Visa Inc. stated that it “believe[d] there [was] compelling logic for both Visa Inc. and Visa Europe to consummate a business combination,” and that it was “regularly [engaging] in such discussions” with Visa Europe.10. This week, the two companies finally reached the $23 billion agreement.11

Interestingly, the deal is an all-cash transaction, with roughly 75% to be paid up front and the remainder four years later.12 The newly combined company is expected to have upwards of $15 billion in revenue and almost 3 billion debit and credit cards issued13 The companies now look forward to obtaining regulatory approval to move forward with the deal14

  1. Chad Bray, Visa to Buy Back Former Europe Unit for Up to $23.3 billion, The New York Times (Nov. 2, 2015), http://www.nytimes.com/2015/11/03/business/dealbook/visa-to-buy-back-former-europe-unit-for-up-to-23-3-billion.html?ref=topics. ↩

  2. Id. ↩

  3. Elizabeth Dexheimer, Visa Surges as Firm Sees Visa Europe Deal Possible This Year, Bloomberg Business (Jul. 23, 2015), http://www.bloomberg.com/news/articles/2015-07-23/visa-profit-beats-estimates-as-consumer-spending-increases ↩

  4. Id. ↩

  5. Id. ↩

  6. Marcin Sobczyk, Andrew R. Johnson and Dana Cimilluca, Visa May Have to Buy Europe System, The Wall Street Journal (Mar. 19, 2013) http://www.wsj.com/articles/SB10001424127887323415304578370271611334206. ↩

  7. Id.). The decision to exercise would have cost Visa Inc. anywhere from $3 to $11 billion. ((Id. ↩

  8. Id. ↩

  9. Michael J. de la Merced, Visa and Visa Europe Are Said to Consider Reunification, The New York Times (May 8, 2015), http://www.nytimes.com/2015/05/09/business/dealbook/visa-and-visa-europe-are-said-to-consider-reunification.html?_r=0. ↩

  10. Visa Inc. Reports Fiscal Third Quarter 2015 Earnings Results, Investor.Visa.com, http://investor.visa.com/news/news-details/2015/Visa-Inc-Reports-Fiscal-Third-Quarter-2015-Earnings-Results/default.aspx (last visited Nov. 2, 2015 ↩

  11. Bray, supra note 1 ↩

  12. Id. ↩

  13. Id. ↩

  14. Id. ↩

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