In a move "broadly based on proposed antitrust deals" with Visa (V) and MasterCard (MA), the EU...


In a move "broadly based on proposed antitrust deals" with Visa (V) and MasterCard (MA), the EU proposes a cap on credit and debit card processing fees of 0.2% to be implemented after a two-year "transition period" during which the ceiling will only apply to cross-border charges, FT says. The move is expected to result in a €4.5B reduction in fees, according to the European Commission. V -1.32% and MA -1.66% AH.

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Comments (14)
  • alexs135
    , contributor
    Comments (7) | Send Message
     
    Visa has no European exposure, and thus no exposure to the EU proposed cap, since it doesn't own Visa Europe at this time
    16 Jul 2013, 05:32 PM Reply Like
  • ChuckXX
    , contributor
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    I agree with alexs135 until proven otherwise.
    16 Jul 2013, 06:14 PM Reply Like
  • MacCBOE
    , contributor
    Comments (32) | Send Message
     
    alexs135 is correct, and it was the EU's insistence that Visa Europe be kept out of Visa USA's hands . . . now they can manipulate and milk and finally do in their own cash cow as they please until all the life is drained out of the enterprise.
    17 Jul 2013, 02:26 AM Reply Like
  • Joshua Heller
    , contributor
    Comments (497) | Send Message
     
    Yes but Visa Europe owners have a put option.
    17 Jul 2013, 02:49 AM Reply Like
  • Philip Saglimbeni
    , contributor
    Comments (479) | Send Message
     
    Joshua Heller is correct, banks that control Visa Europe have the ability to force Visa to buy Visa Europe via put options. It was announced in March of this year that they were considering it and was largely looked at as a positive by investors. Now, not so much. I'm long both V and MA and am bothered by this news as it really is the only things that can stop these two juggernauts.
    17 Jul 2013, 08:11 AM Reply Like
  • MDaceUT
    , contributor
    Comments (165) | Send Message
     
    disagree... Nothing can stop these juggernauts. I have been in Visa since IPO. If the cap on fee's in US didn't hamper there growth, cap in EU certainly will not hamper growth for either MA or V. There is a secular shift from cash to plastic in this world and nothing can stop this run-away train.
    17 Jul 2013, 09:02 PM Reply Like
  • ChuckXX
    , contributor
    Comments (1791) | Send Message
     
    MDaceUT; Thats what they said about Microsoft back in the 90's. "Nothing can stop this juggernaut". Well go look at a 13 year chart of Microsoft and get back to me on your comment.
    19 Jul 2013, 08:59 AM Reply Like
  • Joshua Heller
    , contributor
    Comments (497) | Send Message
     
    I am long MA and at times have been long V. I'm just correcting wrong information about Visa Europe.
    18 Jul 2013, 12:27 AM Reply Like
  • Philip Saglimbeni
    , contributor
    Comments (479) | Send Message
     
    Joshua,

     

    You are right and anyone who says regulation is not a factor at all is not correct IMO. It will hamper growth in some form but it is not enough to override the great global growth story. As MDaceUT said, the shift to plastic, as well as various forms of mobile payments, is happening around the world. 80% of the globe still uses cash, 50% still in the US alone and there is tremendous growth potential outside of EU. Market seems to think it is not a long-term problem and I tend to agree, although it is a bit unsettling to me whenever these regs happen. Still long MA and V.
    18 Jul 2013, 10:31 AM Reply Like
  • alexs135
    , contributor
    Comments (7) | Send Message
     
    Since that was a quote from the WSJ about the put options, do you know the price of the put options, if its a set or negotiable price, and when they can be acted upon? Just because Visa is "forced" to buy Visa Europe at some point doesn't mean a whole lot without this info.

     

    Currently this information isn't available and analysts are hoping for more color when Visa reports on July 24th. Despite the put options, analysts from Citi and Morgan Stanley have both said that Visa has no exposure to Europe until Visa Europe is purchased at a later date.

     

    Just wanted to make sure you had the correct information.
    18 Jul 2013, 06:06 PM Reply Like
  • Philip Saglimbeni
    , contributor
    Comments (479) | Send Message
     
    I have no information on the put option other than what I've read in WSJ. From what I understand it does mean that $V could go from zero exposure in Europe to significant exposure and so this is still a possible risk for V that should be considered. Anyone, analysts included, who fully disregards this possibility outright is not doing investors any favors.
    18 Jul 2013, 06:19 PM Reply Like
  • alexs135
    , contributor
    Comments (7) | Send Message
     
    The time frame of Visa purchasing Visa Europe is unknown. It could be next year, or 3 years, or 5 years, etc. Its tough to put a value of risk on something like this if you don't have a time frame.

     

    In any case, this and other regulation should reduce the price the Visa will have to pay for Visa Europe. If it is a set price, then yes, this will probably have a negative effect on Visa. However, I would doubt that something like the purchase of a business was established when the option was made.

     

    Until the time frame and price is determined, Visa has no exposure to Europe.
    18 Jul 2013, 07:36 PM Reply Like
  • Joshua Heller
    , contributor
    Comments (497) | Send Message
     
    I read the WSJ on a casual basis and did not see any information there. I read the most recent 10-K when it came out and there is a lengthy discussion about the put option.

     

    While there is more detail, the cost is still unclear. I am sure that V would want to buy Visa Europe at the right price if the parties were inclined to sell it. So don't look at this as a positive or negative. I would actually be quite surprised if Visa Europe would get put because of the 'mega trend' of cash/check conversion to debit/credit in the next 20-30 years. Even with more government regulation, these businesses will make gobs of money.

     

    The perfect hold time (to me) for MA and V is forever, unless somehow the P/E goes crazy in a bubble like internet stocks ala 2000. I do trade one vs the other based on valuation and growth, so I currently only own MA. I think I outsmarted myself as V has been a slightly better performer but both have done very well.

     

    It starts at page 72 on the link below
    http://1.usa.gov/14lf3Zn

     

    "The put option provides a formula for determining the purchase price of the Visa Europe shares, which, subject to certain adjustments, applies Visa Inc.'s forward price-to-earnings multiple, or the P/E ratio (as defined in the option agreement), at the time the option is exercised to Visa Europe's adjusted sustainable income for the forward 12-month period (as defined in the option agreement), or the adjusted sustainable income. The calculation of Visa Europe's adjusted sustainable income under the terms of the put option agreement includes potentially material adjustments for cost synergies and other negotiated items. Upon exercise, the key inputs to this formula, including Visa Europe's adjusted sustainable income, will be the result of negotiation between the Company and Visa Europe. The put option provides an arbitration mechanism in the event that the two parties are unable to agree on the ultimate purchase price."
    19 Jul 2013, 03:07 AM Reply Like
  • stoj
    , contributor
    Comments (769) | Send Message
     
    Likewise, political comments about transaction taxes, hammered Nyx during 2012. Recession is not the only reason to broadly stay away from Europe.
    20 Jul 2013, 06:59 AM Reply Like
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