SEC Filing: Visa May Have To Pay More Than $10 Billion For Visa Europe

In an SEC filing, Visa says it may have to pay more than $10 billion to buy Visa Europe. Before, Visa has merely said the possible acquisition would cost “several billion or more” U.S. dollars, according to a report in Seeking Alpha.

But whether Visa will ever end up having to purchase Visa Europe is an open question. Indeed, Visa itself said in the filing that it thinks it’s a better chance than not that it will not have to make the purchase. “We have assumed a 40 percent probability of exercise by Visa Europe at some point in the future,” the Visa filing said.

Visa Europe Limited is owned and run by its European member financial institutions and is not a subsidiary of Visa.

“We have granted Visa Europe a put option, which Visa Europe can exercise at any time and which would require us to purchase all outstanding capital stock from Visa Europe’s members within 285 days. Given current economic conditions, the purchase price under the terms of the put option could likely be in excess of $10 billion dollars and we may need to obtain third-party financing in order to meet our obligation through the issuance of either debt or equity,” the filing said. Visa has “determined the fair value of the put option liability to be approximately $145 million. While this amount represents the fair value of the put option at September 30, 2014, it does not represent the actual purchase price that we may be required to pay if the option is exercised.”

The filing also gives the obligatory dire prediction. “If Visa Europe makes us acquire all of its outstanding stock under its put option, we are likely to incur substantial costs and may suffer a material and adverse effect on our operations and net income,” the filing said.

Visa also noted that there is a legal dispute between the two operations as to whether Visa Europe will indemnify Visa in connection with European Competition Proceedings. “Visa Europe has informed Visa Inc. of its position that it is not obligated to indemnify Visa Inc. or Visa International for any claim in the European Competition Proceedings, including claims asserted in either the European Commission matter or the filed or unfiled claims in the U.K. Merchant Litigation. Visa continues to firmly believe that Visa Europe is obligated to indemnify for all such claims. While the parties are not currently in non-binding arbitration, both parties have initiated the executive engagement aspect of the dispute resolution procedure contemplated by the Framework Agreement to resolve their dispute regarding this indemnification issue.”