Summary
Mastercard Inc. (MA) filed an 8-K on October 19, 2012, reporting the definitive entry into a Class Settlement Agreement to resolve U.S. merchant class litigation. This agreement, substantially similar to a previously announced Memorandum of Understanding, was entered into with Visa, Inc., merchant class plaintiffs, and customer banks. The filing also notes the execution of a separate settlement agreement for individual merchant plaintiffs, bringing final resolution to these U.S. litigations. For investors, the key takeaway is the formalization of a settlement that had been anticipated. The total pre-tax financial impact for Mastercard is an estimated $790 million, with charges already recognized in prior quarters ($770 million in Q4 2011 and $20 million in Q2 2012). While the settlement resolves significant litigation, the financial impact has largely been accounted for, reducing near-term uncertainty for shareholders.
Key Highlights
- 1Mastercard entered into a definitive Class Settlement Agreement on October 19, 2012, to resolve U.S. merchant class litigation.
- 2The agreement was made with Visa, Inc., merchant class plaintiffs, and customer banks.
- 3A separate settlement agreement was executed to resolve claims from individual merchant plaintiffs.
- 4The total pre-tax financial impact for Mastercard related to both settlements is estimated at $790 million.
- 5Mastercard had already recorded a pre-tax charge of $770 million in Q4 2011 and an additional $20 million in Q2 2012 for this settlement.
- 6The Class Settlement Agreement is subject to court approval.
- 7This filing formalizes agreements previously disclosed via a Memorandum of Understanding in July 2012.