Visa is restructuring into a public global corporation, and like competitor MasterCard did earlier this year, soon will begin the initial public offering process, the card company announced this month.
The restructuring will create a single company, Visa Inc., through a series of mergers joining Visa USA, Visa Canada and Visa International, which includes the Asia/Pacific, Latin America, the Caribbean and the region encompassing Central and Eastern Europe, the Middle East and Africa. Visa will begin the IPO process on a to-be-decided stock exchange, likely New York, following the mergers. The company also is searching for a CEO as well as independent directors to serve on the global company's board.
Visa Europe, meanwhile, will become a licensee of Visa and will remain a membership association, controlled by its European member banks. All regional boards of directors and Visa International have approved the restructuring, although the plan still is subject to approval by Visa members and regulators.
The move comes as Visa faces increasing pressure from both merchants and regulators who question the fee structure the company uses. Domestically, Visa, as well as MasterCard and their member banks, have been the target of lawsuits from merchants charging collusive pricing involving interchange fees, which are the major source feeding corporate card rebates. While there has been little movement in the United States toward regulating interchange, it already has happened in some global markets, such as Australia.
MasterCard issued an initial public offering of more than 61 million shares of common stock on the New York Stock Exchange this May
(BTN, June 5), a move analysts said was to alleviate such scrutiny. The stock price has soared, beginning at $39 and now trading in the $70 range.
Following the completion of Visa's IPO, all four major corporate card payment networks will be public organizations. American Express already is a public company, and Diners Club is a part of the public Citicorp. As with MasterCard's IPO, Visa's transformation to a public company, as far as current and potential corporate customers are concerned, means easier access to financial information that public companies must disclose under U.S. Securities and Exchange Commission regulations.
Besides interchange questions, card companies and banks also are facing an imminent merger of several European countries into a single domestic market, the Single Euro Payments Area
(BTN, May 15). SEPA should come into being in the next few years, and analysts have said the adjustment could cause banks to lose as much as E29 billion in payment-related revenues.
Visa's new structure is a step toward compliance with SEPA. Although the 4,500 member banks will retain ownership of Visa Europe, Visa will have a minority investment interest in the segment, and Visa Europe will be a minority stockholder in the global company.
"This is a European solution for Europe," according to Jan Lidén, chairman of the Visa Europe board of directors, in a prepared statement. "It will benefit all of our stakeholders—our member banks and their customers—retailers and consumers, and it supports the European Commission's stated goal of creating European-wide payments systems."