IHT : Visa Plans Priceless IPO

Tuesday, February 26, 2008

(Finally) Visa, the world’s largest credit card network, said Monday that it might raise up to $18.8 billion in the largest U.S. initial public offering ever.  Yet the eagerly awaited stock sale comes amid concerns that the global credit crunch could eat into Visa’s business.  The IPO calls for Visa to sell 406 million Class A shares at $37 to $42 each, for proceeds of $15 billion to $17.1 billion, according to a filing with the U.S. Securities and Exchange Commission on Monday.  Visa said it might sell 40.6 million more shares to meet demand, lifting the offering’s potential size to $18.8 billion.  A successful IPO would surpass the $10.6 billion offering in April 2000 by AT&T Wireless Group.  It would also follow a fivefold jump in shares of Visa’s smaller rival MasterCard since that company raised $2.4 billion in a May 2006 offering.  “MasterCard has been an explosive stock, and investors may hope Visa will be the same,” said Steve Roukis, a managing director at Matrix Asset Advisors.  Visa, based in San Francisco, is not directly exposed to rising defaults and late payments because it does not issue its own cards, unlike banks and rival credit card networks like American Express and Discover Financial Services…..Still, analysts called the timing of the deal risky, given falling demand for stocks and initial offerings amid worries that the U.S. economy might be entering or already in a recession.  “Our fear is that as credit deteriorates, consumer spending will go down, and volumes will go down for the card networks,” said John Augustine, chief investment strategist at Fifth Third Private Bank in Cincinnati. “That would hurt revenue and profit.”  It is not clear when Visa plans to go public.  A Visa representative did not return a call seeking comment.

Visa plans to list its shares on the New York Stock Exchange under the symbol V.  It first outlined plans in October 2006 to float a majority stake through an IPO.  Visa is now controlled by about 13,300 member banks and finance companies.  Citing the Nilson Report, a card industry newsletter, Visa said global card transaction volume might increase 11% a year from 2006 to 2012, with faster growth in the Asia-Pacific, Middle East-Africa and Latin America regions.  The Federal Reserve said in December that U.S. consumers conducted 47 billion credit and debit card transactions in 2006, up 36% since 2003, and accounting for half of the 93.3 billion total noncash transactions.  Volume over the three-year period rose 62% in debit cards and 14% in credit cards, Fed data show.  The volume of checks, in contrast, fell 18%.  In the fourth quarter of 2007, Visa’s net income more than doubled to $424 million, while revenue increased 76% to $1.49 billion. MasterCard, based in Purchase, New York, reported profit of $304.2 million on revenue of $1.07 billion in the same period.

Reference : http://www.iht.com/articles/2008/02/25/business/visa.php

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