A substantial amount of the USD 21 billion headline price tag would be deferred and payable according to a range of performance-related conditions, sky.com reports. News of the likely terms of a deal comes after Visa Inc confirmed that it was in discussions with Visa Europe about a combination of their businesses, saying that it hoped to agree a transaction by the end of October, 2015.
Talks between the two Visa entities are continuing, with banking sources close to the discussions saying that many of Visa Europes largest shareholders are inclined to accept a deal on the proposed terms. Under a long-standing agreement between them, Visa Europe has a put option which would oblige Visa Inc to acquire it at a price calculated by a detailed formula.
However, while Visa Inc does not have a formal call option, it is free to make an offer for its European sister at any time and at any price, and it is on this basis that the takeover negotiations are understood to be proceeding. A deal worth more than USD 21 billion would represent positive news for UK banks such as Barclays and Lloyds Banking Group, which have been pressing Visa Europes board to hold out for a bumper price.
Sources indicate that if a takeover of Visa Europe valued it at USD 21 billion, Barclays stake would be worth well over USD 1.57 billion (GBP 1 billion), with Lloyds interest worth hundreds of millions of pounds. Each of the roughly 3,000 lenders which are shareholders in Visa Europe owns a single share in the company, but the economic value of that stake is determined by the volume of business that they conduct through its network.
Previous negotiations about a takeover have met opposition from French bank members of Visa Europe, with their priority being to keep the company independent. Many European countries have their own domestic debit payment networks, while in the UK the vast majority of debit transactions are handled by Visa. Lloyds substantial stake in Visa Europe is partly a consequence of its takeover of HBOS during the 2008 financial crisis, a rare example of a beneficial legacy from that deal. It is unclear whether British banks and other Visa Europe members will be required to negotiate new fee arrangements with Visa Inc if a deal is completed.
Visa Inc is keen to reunite its US and European operations for the first time since 2007 in an effort to compete more effectively with rival Mastercard amid a fast-changing payments industry landscape. Visa Inc was itself part of a global bank-owned association before it became a listed company in 2008. Buying Visa Europe, which processed more than 16 billion transactions in 2014, would strengthen its position as the worlds biggest payments group at a time when its industry is undergoing radical technology-driven shifts. JP Morgan and Goldman Sachs are advising Visa Inc on the talks, while its European counterpart is being advised by Morgan Stanley.
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