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Visa IPO Aftermath: Europe’s in trouble, but China’s buying

Posted March 27, 2008

“The antitrust investigation is standard procedure, according to the commission. But when Mastercard went through the same standard procedure last year, the commission ruled that its exchange fee system was contrary to the EU’s antitrust rules.” — Stephanie Grimmett

by Stephanie Grimmett

Baltimore – (TFN): Maybe Visa already knew this was coming three years ago. That’s when the company consolidated its global networks, but left its European section out in the cold, as a licensee instead of a division of the shiny new Visa Inc. Or maybe the EU’s “special” (read: difficult) corporate legal structure influenced that decision before this particular case was on the docket.

Either way, Visa Inc. (V: NYSE) is looking pretty smart right now:  The European Commission just opened antitrust proceedings against Visa Europe.

The antitrust investigation is standard procedure, according to the commission. But when Mastercard went through the same standard procedure last year, the commission ruled that its exchange fee system was contrary to the EU’s antitrust rules.

This doesn’t bode well for Visa Europe, which has to prove that it doesn’t force vendors to pay exorbitant exchange fees if they accept its cards.

Visa IPO Aftermath: Fees limited allover

With the Fair Fee Act making the rounds in Washington, Visa Inc has enough to worry about stateside without keeping an eye on the EU.

To counteract a possible restriction on its fees in the U.S., Visa has been pushing heavily into markets like China and Brazil, where credit is a new, exciting idea just being discovered by the nouveau prospere (well, I can’t call them riche, just yet, but they’re thriving all the same).
And now China is pushing back, or at least taking an interest in a company that has developed such an avid interest in the pocketbooks of its population. The Chinese sovereign fund (the real one, not just a company that’s owned by the Chinese government) has piled more than $100 million into Visa stock.

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Visa IPO Aftermath: China takes a stake

China Investment Corp (CIC), a $200 billion fund, bought the shares in Visa’s IPO last week. And its seen a 43% gain on its investment, as of market close today (Thursday). CIC already has a $5 billion stake in Morgan Stanley (MS: NYSE) and a $3 billion investment in Blackstone (BX: NYSE). I assume this means the fund is looking very long-term in its investments since both of those companies are struggling to regain their stock strength.

China Life Insurance (LFC: NYSE) bought three times as much as the CIC, weighing in with a hefty $300 million investment in Visa’s IPO. LFC is China’s largest life insurer by premiums.

And if you think about it, the buy-in is only fair. If the credit card issuer wants the Chinese to “take Visa,” the company will have to give a bit back in stock appreciation.

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Posted by Stephanie Grimmett · Filed Under International Investing 

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