Visa's Reunification Brings Needed Global Reach, Resources
Visa's agreement to reunite with Visa Europe positions the global card brand to better address a world where payments and commerce have fewer borders.
Visa and Visa Europe separated in 2007 in anticipation of Visa Inc.'s IPO. The organizations have been in discussions about reunification in recent years, with Visa Europe's board having a perpetual put option to require Visa to purchase its outstanding share. Last week, reports leaked that a deal to reunify was imminent.
Visa Inc., of Foster City, Calif., described the benefits of the deal as blending Visa Inc.'s resources and technology with London-based Visa Europe's local expertise and market reach.
"The transaction will provide European clients with direct access to our investments in technology, differentiated products and services, capital and talent," Visa CEO Charlie Scharf said during prepared remarks on a Nov. 2 earnings call. "We'll also prioritize European needs in the allocation of our resources and we believe we can deliver a stronger set of digital capabilities than would be possible without this combination."
Visa Inc. has been steadily building out its product reach on a global scale. Efforts like Visa Checkout, its online payment system, has 7 million users and the support of 470 financial institutions worldwide. As technology advances beyond the capabilities of plastic payment cards, Visa plans to rely more heavily on digital technologies such as tokenization.
Visa plans to open its technology platform throughout Europe, and Visa Europe had already announced plans to roll out Visa Checkout, Scharf said. "We're already working with them in the context," Scharf said.
Visa Inc. agreed to acquire Visa Europe for €11.5 billion (US$12.7 billion) in cash and preferred stock convertible into Visa class A common stock valued at €5 billion (US$5.5 billion). Visa Europe's members could also earn a cash payment of up to €4.7 billion, bringing the total acquisition cost to €21.2 billion (US$23.4 billion).
"One of the strategic benefits of the transaction is that we will be able to deliver enhanced digital and mobility capabilities in Europe so this will be an important focus," Scharf said. "Our plan is to provide access to our digital solutions road map and partners."
Visa Inc. will fully integrate its systems with Visa Europe, a project that could take three to four years to complete as Visa will "work carefully with our clients to do this properly," Scharf said.
Scharf did not provide any details about the economic model Visa will follow for its integration with Visa Europe, saying, "It’s obviously a very competitive environment and please remember that it wouldn’t be intelligent for us to telegraph our specific plans."
Though major card brands have had some regulatory and interchange issues confronting them in Europe, the competition in the market has been strong and is likely to heat up with Visa's acquisition.
"As we become stronger here, our competitors will become stronger here," Scharf said of the European payment card landscape. The strong competition in Europe has come about because of Visa's and MasterCard's expansion as publicly-traded companies.
Visa Inc. has always kept a close watch on MasterCard and other global rivals because "because we want to learn and we compete with them every day," Scharf said.