Following the lead of MasterCard Inc., competitor Visa announced Wednesday that it plans to restructure its organization to create a new company and then sell shares in an initial public offering.
The move announced by the San Francisco-based Visa, operator of the world’s largest consumer credit card payment system, follows MasterCard’s move last May to go public.
Since its IPO, the shares of No. 2 card issuer MasterCard have soared from an opening day price of $46. They’ve been so strong that several analysts downgraded the stock this week as overvalued.
Visa, which is an association owned by banks, initially said it wouldn’t follow MasterCard’s lead and, instead, sought to add more independent directors to its board and modify its operating rules.
The company did not say in its announcement why it changed that view.
“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, chairman of the Visa International board 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.”
Visa is currently a private membership association jointly owned by more than 20,000 financial institutions around the world.
In the first step, a new company called Visa Inc. will be created through a series of mergers involving Visa Canada, Visa USA and Visa International, which includes the regions of Asia Pacific, Latin America and the Caribbean, and Central and Eastern Europe, Middle East and Africa.
Visa Europe will remain a membership association, owned and governed by its European member banks, and become a licensee of Visa Inc.
Visa said the restructuring will improve organizational efficiency, address certain legal claims that exist in some markets, and increase access to capital.
The announcement gave no details of the legal issues, but a number of large merchants and retail trade associations have filed suits against Visa USA and MasterCard over the fees they charge for processing credit card transactions, arguing that the card companies have colluded to keep out competition and set fees too high.
Visa said that after the reorganization is complete, it will begin the IPO process and list its shares on a major stock exchange. It expects most of the shares in the reorganized company will be sold to the public.
A stock offering could come in 12 to 18 months, Peter Hawkins, the head of Visa’s restructuring committee, said on a conference call with reporters Wednesday.
Adam B. Frisch, an analyst with UBS Investment Research, said in a research note that Visa’s move was “not surprising given MasterCard’s IPO in May and stock performance.”
He suggested that as a public company, Visa could enter “new and complementary areas of processing” such as money transfers, health care and mobile payments.
The boards of Visa’s six regions and Visa International have unanimously approved the plans, which are now subject to approval by Visa members and regulatory authorities, Visa said.
Visa Europe will be a minority stockholder in the global company, and Visa Inc. will have a minority investment interest in Visa Europe. As part of the restructuring, Visa Inc.’s board will consist of a majority of independent directors. A search for independent directors and a chief executive officer for Visa Inc. is under way.
There are more than 1.4 billion Visa payment card worldwide, the company said. It added: Visa products currently generate more than $4 trillion in sales volume worldwide. Visa has unsurpassed acceptance at more than 24 million locations worldwide including one million ATMs.
MasterCard, which is headquartered in Purchase, N.Y., has some 750 million cards worldwide, with gross dollar volume of purchases totaling $1.7 trillion in 2005.