Visa Announces Earnings, Restructuring in Advance of IPO

Visa Inc. plans to offer a majority ownership in the firm when it goes public in early 2008, according to a filing the San Francisco-based card network made with the U.S. Securities and Exchange Commission Friday.

Visa plans to restructure its six operating regions—Visa USA, Visa Europe, Visa Canada, Visa Asia Pacific, Visa Latin America and Caribbean, and Visa Central and Eastern Europe, Middle East and Africa. Five of the regions will become part of Visa Inc. while Visa Europe will remain an independent organization owning nearly 12 percent of the company.

Visa Inc. was worth nearly $24 billion on a pro forma basis at the end of the first quarter, according to the S-4 filing. Additionally, Visa Inc. reported net income of $525.9 million, or 68 cents per share, on operating revenue of $2.36 billion for the six months ended March 31.

After the restructuring, Visa Inc. will have 775,080,512 shares outstanding. Shares will be allocated on a regional basis depending on the 2008 net income. The US region will control about 55 percent of shares outstanding, Asia Pacific about 15.4 percent, Latin America 10.3 percent, Central and Eastern Europe, Middle East and Africa about 4.7 percent and Canada about 2.8 percent. Visa Europe will have two share classes and control about 11.7 percent of shares outstanding.

Visa Europe will remain a separate entity and not become a part of Visa Inc. It will pay Visa Inc. an annual licensing fee for use of its brand and technologies. By remaining independent Visa Europe will be “best positioned to serve a borderless payments market in Europe,” according to the SEC filing.

Shareholders will have 120 days to approve the restructuring plan. The timing of the initial public offering will be determined if shareholders approve the plans.

The plan will be voted on by Visa’s 14,000 member shareholders around the world. However, the organization is generally controlled by several huge multinational banks.

For instance, more than 58 percent of Visa USA, by far the largest segment of the Visa group, is controlled by six American banks, according to the S-4 filing. JPMorgan Chase owns 23.4 percent of Visa USA, Bank of America owns 11.5 percent, National City Corp. 8 percent, Citigroup 5.5 percent, U.S. Bancorp 5.1 percent, and Wells Fargo & Co. 5 percent.

VISA announced plans to go public following the hugely successful May 2006 public offering by MasterCard Inc. Shares of MasterCard closed at $168.43 on Friday after its initial public offering price of $39.

Visa reports that capital raised by the share offering will be used to invest in new technologies, market the brand and pay off possible legal costs. Visa and MasterCard are being sued by merchants over their pricing policies for card acceptance. As part of the restructuring, Visa will create a litigation committee that will determine how much funds to place in an escrow account to respond to the suits. MasterCard set aside $665 million of the money raised from its initial public offering to pay for possible legal costs and a settlement.