Visa eventually follows Master, plans IPO

Apparently impressed with the MasterCard Inc.’s move last May to go public, Visa, the world's largest credit card payment system, has announced yesterday its plans to restructure its organization to create a new company and then sell shares in an initial public offering (IPO).

San Francisco-based Visa said, it is planning to have access to the capital markets soon. The credit card company Visa, an association owned by banks, has announced that it will see the US and international units merge.

The new corporation will list on the stock market as Visa Incorporated, through an IPO. Visa Canada, Visa USA and Visa International in regions of Asia Pacific, Latin America and the Caribbean, Central and Eastern Europe and the Middle East and Africa, will compose Visa Inc. The new company intends to list its shares within the next 12 to 18 months.

Visa Europe will become a licensee of the new company and will remain as a membership association, owned and run by its 4,500 European member banks.

The Visa International Service Association (VISA) initially said it would not track MasterCard's lead, and in place of this it made attempts to add more independent directors to its board and modify its operating rules. It is still ambiguous why it changed that view.

Visa, which is currently a private membership association jointly owned by more than 20,000 financial institutions around the world, said the move would help fund its expansion, boost efficiency and pay the legal costs it faced in some markets.

"This is a great time in Visa's history to make this transition, we continue to be a leader in the payments industry, our growth and emerging market strategies are succeeding, and the growth potential in the global payments industry is tremendous," William I. Campbell, Visa International's board chairman, said in a statement. "We expect that the new structure will accelerate Visa's growth and position us to better serve our financial institutions and merchants."

Under a restructuring plan, Visa, which employs 6,000 people around the world, will improve organizational efficiency, address specific legal claims that exist in some markets, and increase access to capital.

Since its IPO, the shares of Purchase, N.Y. based second largest card issuer MasterCard have soared from an opening day price of US$46. Since its entry on the New York Stock Exchange in May, MasterCard’s shares have risen by nearly 84%. Its shares dropped $2.41, or 3.35%, to $69.50 on the NYSE, yesterday.

Both Visa, which has sold more than 1.4 billion Visa cards worldwide and MasterCard, which has about 750 million cards worldwide, are facing legal action in America from card issuers, American Express and Morgan Stanley's Discover Card unit, indicting them of anti-competitive practices.

Many key merchants and retail trade organizations have sued the two in US over the fees they charge for processing credit card transactions, contending that the card companies have conspired to keep out competition and set hefty charges.

Meanwhile, Visa stated that once the reorganization completes, it will start the IPO process and list its shares on a major stock exchange. The company expects majority of the shares in the reorganized company will be sold to the public.