Visa Inc. would benefit from buying Visa Europe Ltd. because creating a single global business would outweigh regulatory risk, JPMorgan Chase & Co. says.
Visa Europe, a London-based network owned by banks, has a put option giving it the right to require Foster City, Calif.-based Visa to purchase its shares.
"Our longstanding view on the put being exercised is positive, as we believe a consolidated global network is stronger than a split network," Tien-tsin Huang, a JPMorgan analyst who has an overweight rating on Visa shares, said in a note to clients.
Lenders that own Visa Europe are considering requiring Visa to make the purchase, the Wall Street Journal reported yesterday. Visa Chief Executive Officer Charles Scharf is vying with competitors MasterCard Inc. and China UnionPay for a share of the payment-processing market amid a global shift from cash to plastic.
Visa Europe split from Visa prior to its initial public offering in 2008. While purchasing the company could introduce new risks tied to European Union regulations, it would add about $1.2 billion to Visa's annual revenue, Huang wrote.
Visa gained 1 percent to $1.58 at 10:12 a.m. in New York. The shares are up 4 percent this year.
The deal could cost Visa between $3 billion and $11 billion, according to the Wall Street Journal, which attributed the information to people familiar with the matter and analysts' projections. Huang said the deal might cost more than $4.6 billion.
"We have a strong and productive relationship with Visa Europe," Will Valentine, a Visa spokesman, said in a phone interview. He declined to comment further.