Visa Inc., the U.S. based publicly traded organization, announced on Monday November 2nd that they would be acquiring Visa Europe Ltd., their London-based counterpart, for $23.4 billion in cash and stock. The acquisition will increase the number Visa Inc. payment card accounts by 20 percent and total payment processing volume by approximately one-third. The deal, pending regulatory approval, is expected to close by June of 2016.
Eight years after the Visa spun off the European arm into a separate company the two organizations look as though they will once again be reunited. Visa Europe is collectively owned by more than 3,000 banks including Barclays, RBS and HSBC. Visa Inc. will pay as much as €21.2 ($23.4) billion to acquire Visa Europe, with €16.5 ($18.2) billion in cash and preferred stock being paid upfront and the remaining to be paid if certain goals are met after four years.
Before 2007 when Visa Inc. became a publicly held, for-profit organization, it was collectively owned by banks or issuers. Visa Europe maintained this structure as it is owned by over 3,000 issuers across 38 European countries. This structure of ownership along with more interchange regulations in Europe creates notable differences between the two companies in terms of profit margins. Visa Inc. generates 33 basis points of yield on their payment volume compared to just 9 basis points for Visa Europe.
According to their annual report, Visa Europe managed over 500 million payment card accounts and processed more than 16 billion transactions worth $1.65 trillion in 2014. Visa Europe netted €219.8 ($241) million over that time, which was a 29 percent increase in profit from the year before. For comparison, Visa Inc. processed $1.265 trillion, about three-fourths of what Visa Europe processes annually, in the fiscal quarter ending this past September, and has 2.44 billion active card accounts.
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