8-KMaterial Agreements

VISA INC. 8-K Report, Material Agreement (May 10, 2016)

Filed May 10, 2016For Securities:V

Summary

Visa Inc. (V) has filed an 8-K report detailing an amendment to its acquisition agreement for Visa Europe. The primary change involves the financial terms of the transaction. The company has eliminated a contingent payment of up to €4 billion, simplifying the deal structure and providing greater certainty on costs. Instead, Visa Inc. will pay an increased up-front cash consideration and a fixed deferred payment. This amended agreement reflects a significant shift in how Visa Inc. is structuring the acquisition of Visa Europe. The increased up-front cash payment and the elimination of contingent consideration suggest a move towards a more predictable financial outlay. Investors should note that the total potential cash outflow may be higher under this revised agreement compared to the original, depending on future performance if the contingent payment was achieved. However, the removal of contingent payments reduces the uncertainty associated with the deal's final cost.

Key Highlights

  • 1Visa Inc. entered into an Amended and Restated Transaction Agreement to acquire 100% of Visa Europe.
  • 2The contingent consideration of up to €4 billion (plus interest) payable to Visa Europe members has been eliminated.
  • 3The aggregate up-front cash consideration has increased to €12.25 billion (from €11.5 billion), an increase of €750 million.
  • 4An additional cash payment of €1.0 billion (plus interest) will be made on the third anniversary of the closing.
  • 5Both Visa Inc.'s and Visa Europe's boards unanimously approved the Amended Transaction Agreement.
  • 6The terms align with Visa Inc.'s preliminary agreement disclosed on April 21, 2016.
  • 7An Amended and Restated Amendment to the Option Agreement was also executed to align with the revised financial terms.

Frequently Asked Questions

The main change is the modification of the financial terms. The contingent consideration of up to €4 billion has been removed and replaced with a higher up-front cash payment and a fixed deferred cash payment on the third anniversary of the closing.

The up-front cash consideration has increased by €750 million to €12.25 billion. Additionally, there is a new fixed payment of €1.0 billion due on the third anniversary of closing. The elimination of contingent consideration means the maximum potential payout structure has changed from variable to more fixed.

Eliminating contingent consideration simplifies the deal structure and removes uncertainty regarding the final cost. It provides greater predictability for financial planning and reporting. The increased up-front payment and fixed deferred payment offer a more defined financial commitment.

The filing states that the terms of the Transaction remain otherwise unchanged, apart from the revised financial considerations and the alignment of the Option Agreement.