Visa Surges on Talks to Acquire Visa Europe This Year

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Visa Inc. shares climbed to a record high after the world’s biggest payments network said it’s in talks to possibly reunite with Visa Europe Ltd.

Visa rose 4.6 percent to $75.05 at 12:10 p.m. in New York, the best performance in the Dow Jones Industrial Average, and earlier surged as high as $76.92. The stock gained 14 percent this year, compared with the Dow’s 1 percent decline.

On Thursday, Visa reported fiscal third-quarter profit that beat analysts’ estimates and boosted its full-year forecast for earnings-per-share growth. The Foster City, California-based company also provided an update on its expectations to complete discussions over a potential deal to acquire its European counterpart by October.

“There is compelling logic for both Visa Inc. and Visa Europe to consummate a business combination and therefore regularly engages in such discussions,” the U.S. firm said in a statement, adding there’s no assurance a deal will happen.

Visa Europe split off from its parent in 2007 before the U.S. company’s initial public offering. Visa Europe is owned by more than 3,000 European banks and has a put option that would force its former parent to buy it within about nine months if at least 80 percent of its board agrees, regulatory filings show.

“At this stage, there is no certainty about the outcome of those discussions, and Visa Europe remains focused on continuing to develop its business,” the London-based company said Friday in an e-mailed statement.

A deal for Visa Europe could be valued at as much as $20 billion, people with knowledge of the matter said earlier this year. Darrin Peller, an analyst at Barclays Plc, estimates an acquisition could help add as much as 10 cents a share to Visa’s earnings next year.

Buyback Restrictions

Restrictions would be placed on Visa’s ability to repurchase stock if the purchase happens, Chief Executive Officer Charlie Scharf said on a conference call Thursday. Visa also increased its cost estimate for exercising the put option to more than $15 billion, from more than $10 billion. The final price depends on a complicated formula with a range of variables.

Visa’s net income for the quarter ended June 30 climbed 25 percent to $1.7 billion, or 69 cents a share, from a year earlier. Profit excluding a tax benefit and an adjustment to the Visa Europe put option was 62 cents a share, topping the 58-cent average estimate of analysts in a Bloomberg survey.

Revenue rose 12 percent to $3.52 billion, beating analysts’ estimates of $3.36 billion. Total operating expenses increased 11 percent to $1.3 billion. Visa revised its EPS growth forecast for the fiscal year ending Sept. 30 to “mid-teens range” from “low-end of the mid-teens.”

“Visa continues to post strong results despite little improvement in consumer spending,” Scott Valentin, an FBR Capital Markets analyst, said in a note to clients.