Visa Inc., the world's biggest payments network, said it may have to pay more than $10 billion to buy Visa Europe Ltd. if the banks that own it decide to exercise their option to sell.
Visa may seek third-party financing or sell debt to help pay for the purchase, the Foster City, California-based firm said today in its annual regulatory filing. The company said last year that London-based Visa Europe's perpetual put option could cost several billion dollars or more.
"This is a significant increase" from the 2013 estimate, Jason Kupferberg, a Jefferies Group LLC analyst, said today in a note to clients.
Visa Inc., which has $7 billion of unrestricted cash and an untapped $3 billion line of credit, could be exposed to European Union regulations and future litigation involving Visa Europe if the option is exercised, Kupferberg wrote. For the purposes of valuing the option, Visa assumes a 40 percent probability that it will be exercised "at some point in the future," the company said in the filing.
The European firm split from Visa Inc. prior to the U.S. company's 2008 initial public offering. While purchasing Visa Europe could introduce new risks, it would add about $1.2 billion to the U.S. firm's annual revenue, Tien-tsin Huang, a JPMorgan Chase & Co. analyst, estimated last year.
Visa, the largest component of the Dow Jones Industrial Average, rose 0.7 percent to $253.48 at 11:11 a.m. in New York. The shares have climbed 14 percent this year, topping the Dow's 7.7 percent advance.