The new corporation will be owned by its members and thencommence the IPO process on a major stock exchange, but the branddid not indicate which one. The transformation is expected to takebetween 12-18 months.

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The move has been approved by the boards of directors in each ofVisa's six regions and Visa International voted unanimously toapprove it. It remains subject to the approval of members andregulators.

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Some industry watchers have wondered if the move to a publiccompany might trigger some anti-trust concerns with regulators. ButDavid John, a banking analyst with the predominantly conservativeHeritage Foundation, a public policy firm in Washington, D.C.,doubted that there would be many anti-trust concerns.

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“Simply changing its structure shouldn't increase the anti-trustconcerns,” John said, “because that alone shouldn't increase Visa'smarket share. Anti-trust would become a much greater concern ifVisa were to want to buy another card brand, which regulators wouldalmost certainly not allow them to do.”

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John said that the regulatory issues involving the restructuringwould center on the Securities and Exchange Commission and theSarbanes Oxley Act after the restructuring and IPO.

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“It may well be that they saw that their previous course ofaction was not working as well as they might have hoped and thatMasterCard did better with its restructuring than had beenexpected,” John noted.

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He also pointed out that Visa Inc. would have somewhat of anadvantage because it will be able to start out with the newregulatory requirements in mind rather than have to change itsprocedures to adapt to new regulations.

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Visa's announcement that it was going to become a corporationand issue stock is an abrupt 180-degree turn from the course thecorporation had announced it was taking less than a year ago.

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When making announcements about changing its governancestructure in 2005, the card brand had explicitly stated that itwould remain an association and would not follow MasterCard's moveand become a public company. The announcement of the restructuringremained silent on why Visa had changed paths.

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One industry analyst who tracks cards believed that Visa mighthave been induced to change its direction after seeing how well theMasterCard restructuring and IPO went. MasterCard issued its IPO inMay 2005 and the stock, which opened at $46 per share, has closedas high as $70 per share recently.

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Visa mentioned legal issues in the press release announcing therestructuring, but did not go into any details. Analysts have longpointed out that a flood of lawsuits from retailers and others havebeen pushing the card brand toward a course that will provide it agood deal more cash.

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Within the new model, Visa Europe will retain its member-ownedassociation structure, with continued ownership by its 4,500European member banks, and will operate as a licensee of Visa Inc.This structure will enable Visa Europe to focus on the significantopportunities arising from the formation of an internal market forpayments in Europe through the Single Euro Payments Area (SEPA).Visa Europe will be a minority stockholder in the global company,and Visa Inc. will have a minority investment interest in VisaEurope.

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“Visa recognizes that the unique features of the European marketrequire a tailored approach,” said Jan Liden, chairman of VisaEurope. “This is a European solution for Europe. It will benefitall of our stakeholders–our member banks and theircustomers–retailers and consumers. And it supports the EuropeanCommission's stated goal of creating European-wide paymentssystems.” The Credit Union Effect

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As of press time no one familiar with a credit union's role inVisa was prepared to comment on what the restructuring might meanfor CUs. Robert Hackney, president of Card Services for CreditUnions, the association of credit unions that process their cardtransactions with Fidelity National Information Systems, is amember of Visa USA's Board of Directors, but declined to comment onthe restructuring until after Visa cleared more information forpublic consumption.

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Off the record, a number of analysts pointed out that astock-owned company that issues stock will shift some of the legalliability for Visa, should legal decisions go against the cardbrand, away from the members of Visa and more toward Visa Inc.itself. This should help shield both credit and community banksfrom the fears of any longstanding legal and financial impact fromVisa.

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But shielding that liability has brought at least one negative.Both Standard & Poor's Ratings Services and Moody's InvestorsService have changed their ratings for Visa International after thecard brand made its announcement.

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S&P placed its “A” long-term and “A-1″ short-term ratingsfor Visa International on negative watch, while Moody's changed theoutlook some of Visa's debt to negative from stable.

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“It is our understanding that within the process of convertingto a publicly traded for-profit company, Visa will most likelydiscontinue the right for special assessments of its members,”S&P's credit analyst Daniel Koelsch said in a preparedstatement. “This has been a major ratings factor in our ratings onVisa.”

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The ratings agency also expressed concern over how liabilitiesfrom existing litigations from Visa USA will be treated in the newentity.

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“The change in outlook reflects the potential that following therestructuring, Visa International's rated debt obligations mightnot benefit as substantially from the implicit support of VisaInternational's members,” Moody's Vice President and Senior AnalystCurt Beaudouin said in a statement. –[email protected]

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