Visa Inc (V) May Need $10 Billion to Purchase Visa Europe

Visa Inc (NYSE:V), the leading payments company all over the world, may be needing an amount of up to $10 billion to acquire Visa Europe in case its owners decide to sell it.

In a report by Bloomberg , it is indicated that the yearly regulatory filing of Visa Inc (NYSE:V) noted its plan to look for financing from third party sources to help it raise the needed funding for acquisition of Visa Europe. Citing Jefferies Group LLC analyst Jason Kupferberg, the report noted that Visa Inc may face regulatory risks from European Union including litigation if Visa Europe exercise its prerogative to sell. Visa Europe, while providing credit, debit, and other payment services under license from Visa Inc, is a separate company that is currently owned by 3700 European banks and payment facilities. Visa Europe opted to separate from Visa Inc in 2007 when the latter set up to make an initial public offering in 2008.

European banks owning Visa Europe have been planning to sell it as early as last year. Members of Visa Europe, which has a minor stake holdings in Visa Inc and conducts business under its license, have a put option to sell to Visa Inc (NYSE:V). On the other hand, Visa Inc, which is registered as a payments technology company in the NYSE and receives royalties from the European Visa entity,  have a call option to buy Visa Europe back.

Visa Inc (V)

A report by Finextra, citing the Wall Street Journal, notes that  the European Central Bank have been urging European Visa member banks to adopt a new payment scheme that will introduce a new player in the market and do away with the Visa/Mastercard ‘duopoly’, and it also pushed for an expedited adoption of SEPA (Single European Payment Area) for debit cards. The report noted Visa Europe’s sale as yielding about $3 billion as per assessment last year, as opposed to the current valuation of $10 billion.

Visa Inc (NYSE:V), having an asset of $7 billion cash and $3 billion credit line, can realize an additional annual revenue of $1.2 billion if it will purchase Visa Europe, as per estimates last year by JPMorgan analyst Tien-tsin Huang.

This article has been written by Nonito Guntan.

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