M&A Update: Visa Europe Deal Tweaked, MasterCard Eyeing VocaLink
Visa Inc. has amended the terms of its pending acquisition of Visa Europe, reducing a planned future payment in favor of additional cash up front. Under the amended agreement, Visa Inc. will pay €17.25 billion (US$19.3 billion) up front to take over its bank-owned European affiliate—€750 million (US$843 million) more than the initial sale agreement, struck in November 2015. In return, a planned payment of up to €4.7 billion (US$5.3 billion) payable upon the fourth anniversary of the sale closing has been scrapped; instead, Visa Inc. will pay €1.0 billion (US$1.1 billion), plus 4 percent compound annual interest, upon the third anniversary of the closing.
Visa Inc. said the agreement was amended in response to feedback received from the European Commission. Both companies have granted preliminary approval to the amended agreement, but the deal remains subject to further negotiation and regulatory approval. Final closing could extend beyond Visa Inc.’s fiscal third quarter—the date originally projected, according to Visa Inc. Soon after the amended agreement was announced, Visa Inc. lowered its projected revenue growth for 2016, to 7 to 8 percent from its previous target of low double-digit growth. Visa Inc. CEO Charles Scharf attributed the revision to an uneven global economy and said the network feels “terrific” about its future with Visa Europe.
Meanwhile, MasterCard has entered into exclusive talks to possibly acquire VocaLink, according to a report by Sky News. The Purchase, N.Y.-based payments network is negotiating with the 13 banks that own VocaLink—including Barclays, HSBC, Lloyds and RBS, which collectively control 80 percent of the company. Citing sources close to the negotiations, the report pegged the potential sale price at around £1 billion (US$1.45 billion).
Acquiring VocaLink would give MasterCard a much larger footprint in the U.K. payments market. VocaLink processed 11 billion transactions in the U.K. last year—more than half of all transactions made in the country—and handles more than 90 percent of all salary payments and virtually all state benefits in the U.K. VocaLink also is a key player in faster payments initiatives on both sides of the Atlantic, powering the U.K.’s Faster Payments Service since 2008, and late last year agreeing to collaborate with The Clearing House on a real-time payments service in the U.S. The potential sale follows a call from the U.K.’s Payment System Regulator for VocaLink’s bank owners to sell some of their stakes in the company to increase competition and innovation.