The Strategist

Visa to Finally Seal the Deal with Visa Europe

10/30/2015 - 13:28

According to sources familiar with the situation, in the near future the US payment system Visa Inc. will buy Visa Europe, acting on the European market. The deal, which can be announced next Monday, is estimated at $ 22 billion.

Sean MacEntee via flickr
Sean MacEntee via flickr
The world's largest payment system, American Visa Inc., will purchase its former subsidiary Visa Europe Ltd. American media reported this on Thursday, citing sources familiar with the situation. According to them, the deal can cost around $ 22 billion. If the deal goes through, it will be the largest in the history of Visa and combine Visa's international operations within a single company. Analysts expect that the deal may be announced in the near future - most likely during the declaration statements for the third quarter, which will be held on Monday, November 2nd. Indirect evidence of this is the fact that Visa usually reports on third quarter’s financial results at the end of October. This year, the event was appointed by early November.

The fact, that Visa is in preliminary talks to buy Visa Europe, became known in May. Then, experts estimated the deal at about $ 15-20 billion. Rumors about negotiations between the companies periodically arose earlier. According to experts, this time both companies are quite interested in the deal, so it is likely to take place.

- This deal has come and gone many times, but it is hard to imagine, when they have come this far, what could happen to make either side walk away, - said analyst at Sanford C. Bernstein & Co Lisa Ellis. Previously, she predicted that the conclusion of this transaction would increase Visa’s income to share at 12% in 2017. Citigroup analyst Donald Fandetti expects an increase in revenue in connection with the transaction by 5%.

According to 28 analysts surveyed by Bloomberg, the company net profit in 2015 will increase from $ 5.7 bln. to $ 6.43 bln. The deal should help to strengthen Visa’s position in Europe. Now Visa holds a relatively weak position on the European market - 54% of revenues in 2014 came from the US, and the European division is inferior to its main competitor - the payment system MasterCard.

Visa Europe separated from Visa during reorganization of the company in 2007, shortly before the March 2008, when Visa held IPO.