The Green Sheet Online Edition
March 10, 2008 • Issue 08:03:01
Visa shoots for largest U.S. IPO ever
In a Feb. 25, 2008, filing with the U.S. Securities and Exchange Commission, Visa Inc. set forth plans to make an initial public offering of 406 million shares of class A common stock. Proposed at a maximum price per share of $42, San Francisco-based Visa could raise as much as $17 billion, making it the largest IPO in U.S. history.
Add to that an additional bump of 40.6 million that underwriting banks such as JP Morgan Chase & Co. and Citigroup are given as an option to sell, and Visa may see a windfall of close to $18.8 billion, far surpassing the $10.6 billion amassed by AT&T Wireless when it went public in April 2000.
Visa announced plans to go public in October 2006. At the time, the card Association estimated the process would take 12 to 18 months. In May 2007, Visa named Joseph Saunders as Chairman and Chief Executive Officer.
A month later it outlined to the SEC its plans to restructure and combine its global operations under the name Visa Inc., completing the restructuring of its five corporate entities in October 2007.
Visa, which will trade under the sticker symbol V on the New York Stock Exchange, follows its chief rival, MasterCard Worldwide, in going public. The number two card Association went public in May 2006, raising almost $2.4 billion. MasterCard's price per share has risen from $46.00 at its IPO to trade routinely above $190.00 per share since.
Visa claims in its filing that the card company accounted for 44 billion electronic transactions worth $3.2 trillion in 2006, compared to 23.4 billion transactions worth $1.2 trillion for MasterCard and 4.5 billion transactions worth $562 billion for American Express Co.
"We believe that consumers are increasingly attracted to the convenience, security, enhanced services and rewards associated with electronic payments," stated the filing.
"We also believe that corporations and governments are shifting to electronic payments to improve efficiency, control and security, and that a growing number of merchants are accepting electronic payments to improve sales and customer convenience.
"Recent innovations such as contactless cards and mobile payments are also increasing the attractiveness of electronic payments.
"We believe this shift to electronic payment forms is a worldwide phenomenon; however, in many developing countries, it is at an early stage and will be accelerated by rising incomes, globalization of commerce and increased travel.
"We believe these trends represent a substantial growth opportunity for the global payments industry."
A Global Insight study commissioned by ACI Worldwide Inc. seems to back up Visa's claim. Global Insight found that, from 2004 to 2009, payment transaction growth in Eastern Europe and the Asia-Pacific regions will reach 21.6% and 19.2% respectively, and 15.9% in the Middle East.
Overall, worldwide transaction volume using electronic payments is expected to double in that same period.
Closer to home, a 2006 report from Chicago-based Diamond Management & Technology Consultants Inc. predicted that, by 2009, 3.2 trillion purchases would be made using payment cards in the United States alone, representing nearly half of all transactions. In comparison, only 38% of total purchases in 2004 were made using payment cards.
With the proposed IPO, Visa seeks to expand its "core payments business in new and established geographies and market segments, as well as by broadening our processing capabilities and value-added service offerings for payments and related opportunities."
According to the filing, a portion of the proceeds from the IPO will be used to settle a 2004 lawsuit brought by AmEx against Visa.
The filing did not specify the date of Visa's IPO.
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