REUTERS/Brendan McDermid
This story was delivered to BI Intelligence "Payments Briefing" subscribers. To learn more and subscribe, please click here.
After announcing plans to merge last November, Visa Inc. and Visa Europe, its European counterpart, have amended their merger deal, which brings the deal one step closer to closing.
The new agreement, which the boards of both firms agreed upon unanimously, will have an upfront payout of €12.3 billion ($14 billion), with an additional €1 billion ($1.1 billion) paid in cash on the three-year anniversary of the deal. Based on new data, it's clear that the merger will be mutually beneficial.
Visa Europe’s performance is strong in key markets. The firm recently released its UK Consumer Spending Index, which found that in April, e-commerce spend increased 8.4% year-over-year (YoY), while physical spending remained broadly flat.
This could help the card network accelerate spending growth in the UK. This upward trend holds across the region — European retail e-commerce is expected to grow by 16.4% in 2016, according to RetailMeNot — which could bode well for Visa Europe's overall performance.
Visa Europe's growth momentum will help Visa deepen its presence abroad and give it a way to avoid the negative impacts of currency fluctuation. And Visa Europe could accelerate Visa's volume growth and spend.
Visa Europe could bolster Visa’s cross-border business. In Visa’s Q1 2016 earnings call, the firm said it believes Europe could bolster its cross-border business because frequent intra-European travel gives Visa access to a strong revenue segment that doesn’t feel the impact of a strong dollar as harshly. Strong e-commerce spend could strengthen the firm’s digital arm, as well as provide another channel — digital international buying — for growth.
And it could also help the firm add issuing partners. Unlike the publicly traded Visa Inc., Visa Europe is jointly owned by its member banks. Visa will gain greater access to Visa Europe's existing issuer base, which could be lucrative for Visa given that it will have a chance to serve as a network for, and collect fees alongside, some of Europe's largest issuing banks.
Every subscriber to the BI Intelligence "Payments Briefing" newsletter received this story first thing in the morning, along with other insightful and informative content. To learn more and subscribe, please click here.
