Some of Britain’s biggest banks are in line to land bigger-than-expected windfalls from negotiations about a takeover of Visa Europe that could value the payments company at more than £13bn.
Sky News has learnt that the lenders which control Visa Europe are discussing a scenario that would force Visa Inc to make an offer for the company on different terms to those set out in a long-standing agreement between them.
New York-listed Visa Inc said alongside its quarterly results on Thursday that it was in talks to buy Visa Europe but without specifying the terms of a deal.
“Visa Inc. believes there is compelling logic for both Visa Inc. and Visa Europe to consummate a business combination and therefore regularly engages in such discussions and is currently in such discussions with Visa Europe,” it said.
Under an arrangement between them, Visa Europe can exercise a put option which uses a complex formula to determine the price at which it can force Visa Inc to buy the company.
If the European business chooses not to exercise the put, a deal can still take place but at a price that is subject to more conventional takeover negotiations.
People close to a number of the big UK banks which own stakes in Visa Europe – including Barclays and Lloyds Banking Group – say they believe it can extract a value in “the high teens of billions of Euros” from Visa Inc.
If a takeover of Visa Europe valued it at €19bn (£13.4bn), that would trigger a payout to Barclays of well over £1bn, with hundreds of millions of pounds handed to Lloyds.
JP Morgan and Goldman Sachs are advising Visa Inc on the talks, while its European counterpart is being advised by Morgan Stanley.
Previous negotiations about a takeover have met opposition from French bank members of Visa Europe, with their priority being to keep the company independent.
Each shareholder in Visa Europe owns a single share in the company, but the economic value of that stake is determined by the volume of business that they conduct through its network.
Many European countries have their own domestic debit payment networks, while in the UK the vast majority of debit transactions are handled by Visa.
Lloyds’ substantial stake in Visa Europe is partly a consequence of its takeover of HBOS during the 2008 financial crisis.
Visa Inc is keen to reunite its US and European operations for the first time since 2007 in an effort to compete more effectively with rival Mastercard amid a fast-changing payments industry landscape.
In a regulatory filing earlier this year, Visa Inc said the price of a deal “would likely be in excess of $10bn”.
Visa Inc was itself part of a global bank-owned association before it became a listed company in 2008.
Buying Visa Europe, which processed more than 16bn transactions last year, would strengthen its position as the world’s biggest payments group.
Visa Inc, which said on Thursday that it hoped the discussions would conclude by the end of October, used its results presentation to criticise the governance of FIFA, world football’s governing body, of which it is a major partner.