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| Tuesday, February 9, 2010 |
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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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March 10, 2008 12:01 AM ET
TAKING IT PUBLIC Visa just hired Joseph Saunders as its chief exec.
Not only will investment banks collect about $480 million in underwriting fees from the IPO, but several, including J.P. Morgan Chase, Bank of America and Citigroup, are among Visa's largest shareholders, and stand to gain hundreds of millions of dollars—$1.1 billion in J.P. Morgan's case—from unloading large portions of their stakes. Visa is following in the footsteps of its competitor, MasterCard, which went public in May 2006 in another lucrative offering. But if, as some observers believe, the IPO amounts to a bailout for Visa's financially stressed member banks, why elect to go public now, when the market is so weak? Visa may have a different motivation for going public now, suggests antitrust litigator K. Craig Wildfang of the Minneapolis law firm Robins Kaplan Miller & Ciresi. “The purpose of Visa's IPO is solely to try to get more lenient treatment from the courts under the antitrust laws,” he said. The timing of the offering, Mr. Wildfang believes, is part of Visa's attempt to limit “its legal exposure to the Sherman Act.” Visa has spent years fending off numerous, very expensive, anti-trust lawsuits. In 2001, the Department of Justice won its suit against Visa (and MasterCard) that said Visa's efforts to prevent partner banks from issuing non-Visa-branded credit cards was an illegal “restraint of trade.” (Visa appealed all the way to the Supreme Court, which declined to review the case in 2004.) Civil suits based on the same argument followed from American Express and Discover. Visa settled with American Express for $2 billion, and Discover's case is scheduled to go to trial in September, though a person familiar with the matter told Financial Week it is likely to “be settled before it ever reaches a courtroom—probably for an amount in the B's.” Visa plans to set aside $3 billion of its IPO proceeds to pay for “settlements of, or judgments in, covered litigation.” But $3 billion may not be enough, considering the other suits coming down the pike. The most pressing may be thecase being argued by Mr. Wildfang on behalf of a group of retail merchants who accept Visa credit cards as a form of payment. Visa does not issue credit cards or lend money. That's the job of its member banks, such as B of A, Wells Fargo and Wachovia. Instead, Visa processes the credit card transactions on its electronic payment network, in return for which it charges a host of fees that generated more than $5 billion in revenue for the fiscal year ended Sept. 30. The claim in the “merchant litigation,” filed in 2005 in the U.S. District Court for the Eastern District of New York, is that Visa and MasterCard regularly meet to agree on the interchange fees each will charge its merchants. “That is price-fixing, and it is a violation of the Sherman Act,” Mr. Wildfang alleged. “In any other industry, that would be illegal.” Going public may help Visa defend itself against the charge by convincing courts that it is a single entity. Under the Sherman Act, the “concerted activities” of groups, or “trusts,” are subject to greater scrutiny than the activities of “single actors.” With a few exceptions, such as Microsoft, the government assumes market competition is sufficient to prevent single actors from achieving monopolies, so the courts are more lenient toward single actors. Until now Visa—like MasterCard before it—has existed as part of a group, or a “joint venture” of the banks that own it but also partner with it to facilitate the credit card market. Once the company is public, presto chango. Or so Visa apparently hopes. The company declined comment. But there is a last wrinkle in this theory: Despite MasterCard's IPO, the European Commission recently said in a ruling that it still regards MasterCard to be a group, not a single entity. If U.S. courts use the EU as any guide, Visa may not have much more luck in court after its own IPO. FW
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