Summary
Mastercard Inc. (MA) has filed an 8-K report detailing a significant settlement agreement with American Express (Amex) on June 24, 2008. This agreement resolves all ongoing U.S. federal antitrust litigation between the two companies. The settlement involves a structured payment plan from Mastercard to Amex, commencing in September 2008 and lasting for 12 quarters. While the total potential payout is up to $1.8 billion, Mastercard anticipates recording an approximate $1 billion charge (on a tax-affected net present value basis) in the second quarter of 2008. This charge is contingent upon Amex achieving certain financial performance milestones. The quarterly payments are set at 15% of Amex's U.S. Global Network Services billings, capped at $150 million per quarter, with provisions for adjustments if shorter payments are made in certain quarters. This settlement is a crucial event for Mastercard, as it eliminates significant legal uncertainty and provides a clear financial framework for resolving this long-standing dispute.
Key Highlights
- 1Mastercard Inc. entered into a material definitive agreement with American Express Company to settle U.S. federal antitrust litigation.
- 2The settlement officially ends all existing litigation between Mastercard and American Express.
- 3Mastercard will pay American Express up to $150 million per quarter for 12 quarters, starting September 15, 2008.
- 4The total maximum payment under the settlement is $1.8 billion.
- 5Mastercard expects to record a charge of approximately $1 billion (tax-affected net present value) in the second quarter of 2008 related to the settlement.
- 6Quarterly payments are based on 15% of American Express's U.S. Global Network Services billings, with adjustments for any shortfalls.
- 7The filing includes a press release dated June 25, 2008, as an exhibit, providing further details on the settlement.