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Visa Gets European Commission Nod for Visa Europe Buyout

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The green signal from the European Commission clears all road blocks in Visa Inc.’s (V - Free Report) acquisition of Visa Europe. The deal, which will close this month, is valued at €21.2 billion.

London-based Visa Europe is a cooperative entity comprising over 3,700 European banks and a payments’ leader in the region.

Previously a subsidiary of Visa, Visa Europe has been operating as an independent entity since 2007, before Visa went for its initial public offering in Mar 2008.

Visa considers reuniting with Visa Europe as a crucial long-term growth strategy. The company stands to gain a competitive edge from Visa Europe’s strong business model. Already the leading card processor, the addition of Visa Europe will further boost Visa’s position in a market that is also dominated by the likes of MasterCard Inc. (MA - Free Report) , American Express Co. (AXP - Free Report) and Discover Financial Services (DFS - Free Report) .

Visa will get direct access to the attractive European payments’ market, which was an early adopter of the mobile payments’ system. The region is expected to see further growth in mobile payments given the widespread availability of the Near Field Communication technology. Moreover, a number of new mobile payment partnerships, platforms and products launched by Visa in recent years should increase mobile payments in Europe.

For Visa Europe, the deal will add a new dimension to its services as a result of Visa’s vast scale and resources across the globe.

Visa expects the transaction to be dilutive to its fiscal 2016 adjusted earnings per share in the low single-digit percentage point range. This dilutive effect will be due to preference share issuance and debt issuance related to the financing of the deal. In 2017, the acquisition will accrue to adjusted earnings per share in the low single-digit percentage point range before one-time integration costs. However, upon complete integration, the transaction is expected to be accretive to adjusted earnings per share in the high single-digit percentage point range by fiscal full-year 2020.

Currently, Visa carries a Zacks Rank #3 (Hold).

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