Its Overhaul Complete, Visa Shoots for the Moon with Its Pending IPO

Visa Inc. late Friday said it aims to raise $10 billion in its upcoming initial public offering of stock. The figure, while preliminary, is four times the $2.4 billion MasterCard Inc. grossed in its May 2006 IPO, the first chance the market had to value a bank card network. A Visa spokesperson would not comment, citing Securities and Exchange Commission rules mandating companies to keep quiet ahead of an IPO. But the so-called S-1 Visa filed Friday in connection with the IPO states $10 billion as the figure from which Visa is calculating its registration fee. The filing doesn't say how many shares the San Francisco-based network will sell, and at what price. But in light of MasterCard's strong performance since its IPO?its stock closed Friday at $193 per share, up nearly 400% since it debuted?Visa conceivably could exceed its preliminary number. Reports on the financial wires say $10 billion would put Visa's as the No. 2 all-time IPO, behind only AT&T Wireless Groups $10.6 billion IPO in 2000. Under the planned IPO, which could happen as soon as 120 days after the global reorganization Visa completed Oct. 3, Visa would sell an approximately 51% interest in the company to the public through so-called Class A shares. The rest of the shares?Class B held by Visa USA members and Class C held by other financial-institution members internationally?have no voting rights. Visa's new 18-member board of directors, however, has seven financial-institution members from various regions. The others are chief executive officer Joseph W. Saunders, who is chairman, and 10 independent directors. In the filing, Visa reports 32.4 billion total transactions for the nine months ended March 31, up 14% from the year-earlier period. Total payments volume hit $1.66 trillion, up 12%. Including cash transactions, total volume was $2.55 trillion in the nine months ended March 31, up 15%. The company reports $3.73 billion in operating revenues for the nine months ended June 30, including $1.76 billion from so-called card-service fees, $1.19 billion from data-processing fees and $735 million from international transaction fees. Net income for the nine-month period was $771 million compared with $437 million for the entire fiscal year ended Sept. 30, 2006. The filing says Visa will use the IPO's net proceeds for general corporate purposes, to begin redeeming Class B and Class C shares, and for a deposit into an escrow fund to cover settlements or judgments from litigation. Visa last week disposed of one big legal threat when it settled for up to $2.25 billion an antitrust action brought by American Express Co. (Digital Transactions News, Nov. 7). Yet Visa still faces a host of suits and regulatory challenges involving everything from interchange to antitrust to currency- conversion fees. The restructuring made Visa USA, Visa Canada, and Visa International subsidiaries of Visa Inc. Visa International oversees three of Visa's geographic regions: Asia-Pacific, Latin America and Caribbean, and Central and Eastern Europe, Middle East and Africa. Visa Europe will continue to operate as a licensee of Visa Inc. and to be owned by European banks, and will have a minority interest in Visa Inc. The filing also names Visa's underwriters for the first time: J.P. Morgan Securities Inc., Goldman, Sachs & Co., Banc of America Securities LLC, Citigroup Global Markets Inc., HSBC Securities (USA) Inc., Merrill Lynch, Pierce, Fenner & Smith Inc., UBS Securities LLC and Wachovia Capital Markets, LLC. Despite MasterCard's encouraging experience, Visa's success on Wall Street is by no means guaranteed. Shares of Discover Financial Services LLC have fallen 37% since Morgan Stanley spun off its card subsidiary in late June.