Visa Inc. has agreed to pay as much as USD 23.4 billion for Visa Europe. The deal ends years of speculation about a possible merger of the two companies that had split in 2007 after the U.S. firm’s initial public offering.
The companies issued a statement Monday, confirming that they will be merging their assets. The agreement will likely see Visa Europe expand its electronic transaction business in the continent.
“We have been clear that this was a transaction that made tremendous sense,” said Charles Scharf, chief executive of Visa Inc., in a conference call on Monday morning, according to Wall Street Journal.
Under the terms of the agreement, Visa Inc will pay around USD12.68 billion in cash, followed by USD5.51 in preferred stock convertible into common shares. The companies have also agreed for up to USD5.18 billion in future payments.
According to media reports, as many as 3000 companies are likely to benefit from the Visa Europe buyout, the biggest winner being Barclays Plc.
“Although we see this as a positive in the short term for the U.K. banks as this represents a boost to capital, we do not see this as a free lunch,” Chirantan Barua, an analyst with Sanford C. Bernstein told its clients, according to Bloomberg. The British banks “will see their fee income margin start to be squeezed and we wouldn’t be surprised if Visa tried to increase the margins in Europe at the expense of the banks.”