Visa files $10 bn initial public issue

Visa Inc, the biggest credit-card company, filed to raise as much as $10 billion in the world's largest initial public offering this year.

The San Francisco-based company didn't disclose the number of shares or the dollar amount of the offering in a filing today with the US Securities and Exchange Commission. The amount listed today is a preliminary figure used to calculate the company's registration fee and the eventual sum raised may be different.

Visa announced in October it would combine most of its global businesses. Investors have bid up shares of MasterCard Inc, the second-biggest card company, almost 400 percent since its IPO in May 2006. Discover Financial Services, which was spun off from Morgan Stanley in July, has dropped 38 percent since its debut.

"They're piggybacking off the public market success that Mastercard has enjoyed," said Douglas Ciocca, who helps manage $1.6 billion at Renaissance Financial Corp in Leawood, Kansas. "It gives some indication that there's sustainability to the underlying consumer demand in the economy."

Ciocca, who doesn't hold Mastercard shares, said he'll consider buying Visa after looking at the company's balance sheet, operating margins and revenue prospects in the US and other countries.

Visa combined its businesses, excluding Europe, to save money, facilitate the share sale, streamline decision-making and make acquisitions easier, the filing said. Net income for the combined company was $770.9 million for the nine months ended June 30.

Visa reached an agreement on November 7 to settle a 2004 antitrust suit brought by American Express Co, removing an obstacle to the share sale. The company's member banks must approve the plan and would fund it, Visa said.

American Express, the third-largest credit-card network, filed the suit after the US Supreme Court ruled Visa and MasterCard violated antitrust laws by preventing member banks from offering rival cards. The accord resolves American Express's claims against banks including Wells Fargo & Co, Washington Mutual Inc, JPMorgan Chase & Co and Capital One Financial Corp.

Visa said the payments have a net present value of $1.8 billion, while New York-based American Express said the agreement was worth $2.25 billion.

Visa, which processes more transactions than any rival, is going public to capitalise on consumers' growing preference for credit and debit cards over cash and checks.

Some of the proceeds from the offering will be held in an account to settle lawsuits filed, such as the settlement with American Express. The rest will be used to buy stock from Visa's member companies and to run the business.

The company had revenue of $3.73 billion for the nine months ended June 30, compared with $3.91 billion for fiscal 2006, the filing shows.

"They're processors, not credit extenders," said Walter "Bucky" Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. "Therefore, the more people use their charge cards, the more money they make."

Visa's operating margin was 33 percent for the nine months ended June 30, compared with 18 percent for 2006, helped by a shift in its business model.

Visa said credit card transactions are expected to increase 11 percent globally on a compounded annual basis from 2006 to 2012, citing data from the Nilson Report.

JPMorgan Chase & Co, Goldman Sachs Group Inc, Bank of America Corp, Citigroup Inc, HSBC Plc, Merrill Lynch & Co, UBS AG and Wachovia Corp are managing the sale.

The listing exchange and ticker weren't disclosed.

"With the IPO market, any time the economy is growing at a slower pace, it's tougher to bring a deal," said Marc Pado, chief market strategist at Cantor Fitzgerald LP in San Francisco. "It might send a signal to the market that it's not all going to hell in a hand basket."