Barclays will be the big winner from the buyout of Visa Europe by its US counterpart, which could be worth as much as €21.2bn (£15bn).
Visa Inc will initially pay €16.5bn in cash and shares, followed by a deferred consideration of €4.7bn if the European business meets certain performance targets. This will provide a windfall to the 3,000 banks and payments services firms that collectively own Visa, with several British banks set to pocket the biggest gains.
Top of the list is Barclays, which the Financial Times says handles about ten per cent of Visa Europe's transactions and could be in line for proceeds of as much as £1.3bn. The Daily Telegraph also says Barclays will receive the largest sum but much less at around £400m, while fellow British banks Lloyds (£300m), Royal Bank of Scotland (£200m) and HSBC (£150m) will also profit handsomely.
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All of the stakeowners hold a single share in the business to equalise their voting rights, but these are valued very differently depending on the amount of business transacted. While all will welcome the financial boost from the sale, the Telegraph warns that they "may now get a worse deal from Visa as they will be customers of the firm rather than its owners".
In the UK, the Bank of England is reported to be seeking to limit the impact of the move on cyber-security capabilities by requesting Visa commit to retaining a sizeable UK presence. Visa Europe currently employs 1,700 people in London. In the wake of the deal being announced it confirmed London will remain the headquarters for its European operations.
The FT says the deal is designed to let Visa compete more effectively on a global basis with its arch rival MasterCard, but analysts warned there is a risk that the latter could win back some of the business that was previously tied to Visa Europe.
Barclays and Lloyds in line for £1bn windfall from Visa sale
02 November
The US arm of the credit and debit card business Visa is to re-merge with the European arm it split from eight years' ago in a deal that will generate a windfall of around £1bn for the British banks Barclays and Lloyds.
The Guardian reports that Visa Inc indicated at its results in July that it was in talks about the possibility of consolidating with Visa Europe for the first time since 2007. The deal would unify the brand globally and was thought to be worth about £14bn. Visa Inc said at the time that it would update the market on these discussions no later than its third quarter results today.
In a pre-market announcement alongside the results this afternoon, the company confirmed the deal is going ahead. FastFT notes the transaction will be worth €21.5bn (£15bn), with €16.5bn to be paid upfront and the remainder as an 'earn-out' based on performance targets.
The integration of US and European operations will be a boost for the roughly 3,000 European banks that each own a stake in the business. All of the banks own a single share to equalise voting rights, The Guardian explains, but the holdings have very different monetary values. Barclays' and Lloyds' interests are worth around £1bn based on the buyout price.
One complication is the demand from the Bank of England that a re-unified Visa maintains a significant presence in the UK. Visa Europe currently employs around 1,700 people in London and the BoE is concerned about the knock-on effects for cyber-security if one of the largest card companies were to move its base abroad, says Sky News.
Visa's businesses split to different sides of the Atlantic in 2007. In the US, the Visa Inc arm had a global bank association-ownership structure similar to its European business until its stock exchange listing in 2008.
