The relationship between global chains and Visa has always been complicated, but it looks like the payment game is about to get even more complex.
Visa Europe has always been a very distinct entity, one that cooperates with Visa Inc., but not much more. Now, the banks that own Visa Europe are looking to set up a competing European payment system.
Here's the twist: due to a contractual clause, the Euro renegades could force Visa Inc. into the deal, taking potentially more than $3 billion from Visa (a possibly crippling amount, even for Visa) and using it to fight against Visa, according to a Wall Street Journal report.
In the standard risks area with Visa's SEC filings is a direct reference to this possibility: "The transaction would require Visa Inc. to borrow funds or sell stock, and could reduce its net profit. The exact value of the deal will be determined using a formula based on projected financials of both Visa Inc. and Visa Europe," the Journal reported.
Even though they share a brand, Visa Inc. and Visa Europe are separate entities that run their own clearance systems. The U.S. firm is a payments-technology business listed on the New York Stock Exchange, while the European organization is owned by financial institutions and operates under a license, irrevocable in perpetuity. Visa Europe is a minority stockholder in Visa Inc., and the U.S. company receives royalties from Europe. Visa Inc. earned $55 million in operating revenue from Visa Europe in the fourth calendar quarter of last year.
- see this Wall Street Journal piece (sub. req.)
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