Visa in talks to buy Visa Europe for up to $20bn
Visa is reportedly in preliminary talks to buy its former subsidiary Visa Europe in a deal worth up to $20bn.
The negotiations are in the early stage and could fall apart if the two sides can’t agree on a price, reported Bloomberg.
Both the parties are working with advisors and are trying to reach a deal with a value ranging between $15bn and $20bn.
Visa has a call option to buy shares in Visa Europe, while Visa Europe members have a put option to sell shares to Visa.
According to the publication, the option by Visa Europe will require Visa Inc to purchase their shares at an agreed multiple of earnings within 285 days if at least 80% of its board agrees.
Last Month, Visa said that there is a 40% possibility that Visa Europe would exercise the put option, and that would cost the US company more than $10bn.
Visa told Financial Times in a filing in April said: “Given current economic conditions, the purchase price under the terms of the put option would likely be in excess of $10bn. We may need to obtain third-party financing, either by borrowing funds or by undertaking a subsequent equity offering in order to fund this payment.
“The amount of this potential obligation could vary dramatically based on, among other things, Visa Europe’s adjusted sustainable income and our P/E ratio, in each case, as negotiated at the time the put option is exercised. The put option provides for an arbitration process if the two sides cannot agree on the price.”