Visa Raises $17.9 Billion in Record-Setting U.S. Initial Sale
By Elizabeth Hester
March 19 (Bloomberg) -- Visa Inc., the largest payment-card network, set a record for U.S. initial public offerings yesterday by raising $17.9 billion after the worst start for the Standard & Poor's 500 since 2001.
Underwriters sold 406 million shares of Visa for $44 each, according to a company statement yesterday. That's $2 more than the highest price predicted by San Francisco-based Visa in its prospectus. The IPO eclipses AT&T Wireless Group's $10.6 billion stock offering in 2000. It's the world's second-biggest IPO, after the $22 billion debut by Industrial & Commercial Bank of China Ltd. in 2006.
Visa's sale late yesterday followed the biggest U.S. stock rally in five years, which may bolster the waning demand for IPOs. The offerings had raised $17.6 billion for 136 companies worldwide in 2008, 42 percent less than a year earlier, according to data compiled by Bloomberg. Unlike American Express Co. and Discover Financial Services, which also make loans to consumers, Visa only processes transactions.
``The business model is fantastic,'' said Gwenn Bezard of Aite Group LLC, a Boston-based financial services consulting firm. ``They don't take the risk of extending credit to customers.''
Visa's Class A shares are scheduled to start trading today on the New York Stock Exchange under the ticker ``V,'' the company said. The underwriters may sell 40.6 million more shares to meet any unsatisfied demand.
Preference for Plastic
Visa, led by Chief Executive Officer Joseph Saunders, and MasterCard Inc., the second-biggest card network, are both capitalizing on consumers' increasing preference for credit and debit cards over cash and checks.
Cards will be used for 55 percent of all U.S. transactions by 2011, rising from 40 percent in 2005, according to the Nilson Report, an industry newsletter based in Carpinteria, California.
MasterCard has returned about 440 percent in New York trading since its IPO almost two years ago. The stock doubled in the past year, compared with a 21 percent drop at American Express and Discover's 39 percent decline since its spinoff last year from Morgan Stanley.
Visa's initial public offering completes the transformation of Visa and MasterCard from not-for-profit associations owned by banks to independent companies that serve banks as customers.
The six largest bank owners of Visa may have collected $3.2 billion, according to data compiled by Bloomberg. JPMorgan Chase & Co., the third-largest U.S. bank and Visa's largest bank holder, made approximately $1.26 billion. The bank's remaining Class B shares are worth about $2.84 billion. It has set aside $700 million to cover costs related to Visa litigation.
Credit Losses
Bank of America Corp. made about $625.7 million in the sale and holds an equity stake worth $1.41 billion. Bank of America is Visa's second-largest bank owner and the largest U.S. bank by market value.
The world's biggest financial firms have absorbed $195 billion in writedowns and credit losses since the beginning of 2007, including $37.1 billion by Visa's top holders, according to data compiled by Bloomberg.
Visa agreed on Nov. 7 to settle a 2004 antitrust suit brought by New York-based American Express for $2.25 billion, removing an obstacle to the share sale. Some proceeds from the offering will be used to settle lawsuits including the one with American Express, Visa said in its filing. The rest will be used to buy stock from member companies and to run the business.
American Express, the third-largest credit-card network, sued in November 2004 after the U.S. Supreme Court ruled Visa and MasterCard, based in Purchase, New York, violated antitrust laws by preventing member banks from offering rival cards.
Citigroup Inc. and Bank of America, the two biggest U.S. banks, later agreed to offer American Express services.
The Visa share sale was managed by JPMorgan and Goldman Sachs Group Inc. with assistance from 13 firms including Bank of America and Citigroup.
To contact the reporter on this story: Elizabeth Hester in New York at ehester@bloomberg.net; Hugh Son in New York at hson1@bloomberg.net.
Last Updated: March 19, 2008 00:00 EDT |
