The purchase of its former European subsidiary will allow Visa to better compete against Mastercard in Europe, says an analyst. Fred Katayama reports.
Visa everywhere will now be under one umbrella. The world's largest credit and debt card company is buying its former subsidiary, Visa Europe, for about $23 billion. Visa Europe is a cooperative of European banks that remained a separate unit when Visa in the U.S. got its other units around the world to merge to form Visa Inc in 2007. Visa's revenue is eight times bigger than that of Visa Europe. The acquisition puts Visa in a stronger position to take on Mastercard in Europe. Wedbush analyst Gil Luria thinks it's a very good move, saying "Visa Europe hasn't competed very well with Mastercard, which has done very well in Europe. For doing global initiatives and marketing, it's much better to have one global entity." Luria said Visa is paying much more than expected, so the deal won't add to earnings until 2017. Visa shares, which have vastly outperformed Mastercard over the last 12 months, falling in early trading. Separately, Visa announced its quarterly profit soared, and revenue rose despite the stronger dollar. The company, which recently hiked its dividend, said it'll also buy back more shares.