Visa levers up to reach untapped European payments base

Global electronic payment giant Visa Inc has agreed to acquire its former subsidiary Visa Europe Ltd for approximately €21.2 billion ($23.4 billion) to create one global company, bringing an end to years of market speculation about the unification of the two payment providers, to take on arch rival MasterCard Inc.

The transaction includes 16.5 billion euros up front and as much as 4.7 billion euros more after the fourth anniversary of the deal's completion, the firms said Monday in a statement.

The technology payment's net revenue rose 10.59% YoY to $3.57 billion, compared to $3.23 billion in the same quarter a year ago. The transaction is subject to regulatory approval and is expected to close in Visa's third quarter next year. "United Kingdom banks including Royal Bank of Scotland, Lloyds and Barclays own Visa Europe as do multiple lenders across Europe", Jasper Lawler at CMC Markets said.

Sources said that the BoE had expressed a desire for Visa to commit to keeping a significant number of the 1700-strong Visa Europe‎ workforce in the UK.

Visa said it was targeting savings of $200 million from the deal in 2020, a 30 percent reduction from the current run rate.

European banks are set for a windfall return on their investment in Visa Europe, as Visa Inc confirms a €21.2 billion deal for the European card network. The upfront consideration comprises €11.5 billion of cash and preferred stock convertible into Visa Inc. class A common stock valued at €5 billion.

The company also announced a $5 billion share repurchase programme.

The company claims that the move is expected to add up to around 3,000 European-based issuers, more than 500 million card accounts, and payment volumes of over €1.5 trillion ($1.66 trillion) to its portfolio.

Visa and Visa Europe operated under one banner for years, but had to separate when Visa started its conversion from a co-operative owned by the banks into a publicly traded company.

Worldpay's portion of the consideration will total EUR1.25 billion, including an upfront cash payment of EUR592.0 million and a further EUR374.0 million in shares in Visa Inc, also upfront.

Separately, Visa posted earnings of 62 cents a share in the three months through September, its fiscal fourth quarter, trailing the average estimate of 63 cents a share from Bloomberg.

For fiscal 2016, the company projects adjusted earnings per share growth in the low end of the mid-teens range and revenue growth in high single-digit to low double-digit range.

Investors purchased shares of Visa (NYSE:V) on weakness during trading hours on Monday following a dissappointing earnings announcement, MarketBeat Ratings reports.