Making the roaming rumors true, Visa Inc has announced its deal to acquire Visa Europe, the company’s European counterpart.The deal is said to value around $18.2 billion with an additional payment of up to $5.2 billion which adds up the deal value to be around $23.4 billion.
Visa and Visa Europe both used to be part of the same company. Visa has segregated its European operations as a separate entity around a decade ago, before going public in 2008. 37% of personal consumption expenditures are still conducted through cash and checks in Europe. The lack of proper contributions to earnings from Europe has been Visa’s weakness for long that proved to be advantageous for small competitors like Master Card Inc, which has a bigger market in the European business. Visa depends more on revenue generated on the USA which accounted for 54 percent of revenue in fiscal 2014, compared with 39% of MasterCard.
Charlie Scharf, CEO of Visa said, “This transaction is beneficial for financial institutions, acquirers, merchants, cardholders, and other partners, as well as for our employees and shareholders,”
The merger is sure to bring Visa significant business and growth opportunity as Visa Europe is the largest card network in Europe and it has 500 million cards, issued by 3000 financial partners in 38 countries. Visa Europe processed $2.18 trillion in payment volume of 35 billion transactions in 2014. Another reason would be sufficient scope for growth and expansion. Though Visa is the largest card network in the continent, in Europe 37% of personal expenditure happens through check and cash.
However, the acquisition is also expected to bring short-term risks to Visa and benefit MasterCard, according to analysts including Chris Hickey of Atlantic Equities. Further to the closure of the deal, Via may increase prices and it may be disruptive as the U.S company combines operations with its European counterpart.