UK Banks In Line For £4bn Visa Sale Windfall

Some of Britain's biggest high street lenders are eyeing a windfall that could total more than £4bn from a takeover of Visa Europe, the payments group.

Sky News has learnt that Visa Europe's board appointed investment bankers at Morgan Stanley (Xetra: 885836 - news) in recent days to advise it‎ on discussions about a bid approach from New York-listed Visa Inc (Xetra: A0NC7B - news) .

Barclays‎, Nationwide, Lloyds Banking Group and Royal Bank of Scotland (LSE: RBS.L - news) (RBS) will each receive a chunk of that bonanza if Visa Inc, the New York-listed company, acquires its European sister.

Visa Europe is owned by more than 3000 banks across the Continent, with the company's 20-strong board including representatives of several UK lenders as well as large and small counterparts from around Europe.

One source estimated the UK banks' shareholding in Visa Europe at between‎ 25% and 30%, with Barclays (LSE: BARC.L - news) alone understood to hold an economic interest in the company of just under 10%.

If a takeover of Visa Europe valued it at $20bn (£12.9bn), that would trigger a payout to Barclays of more than £1bn, with hundreds of millions of pounds owed to Lloyds.

A complex formula determines the price at which Visa Europe can force Visa Inc to buy the company, while the US group can also exercise a call option to acquire its sister operation under certain circumstances.

One of the lenders which is represented on Visa Europe's board said that directors would discuss the approach from Visa Inc at a meeting next week.

JP Morgan is understood to be advising Visa Inc on the talks.

Previous negotiations about a takeover have met opposition from French bank members of Visa Europe, with their priority being to keep the company independent.

Documents suggest that 80% of its board needs to approve the exercise of the put option.

The early-stage talks were reported on Friday, sending the US group's shares up by more than 4%.

Each shareholder in Visa Europe owns a single share in the company, but the economic value of that stake is determined by ‎the volume of business that they conduct through its network.

Many European countries have their own domestic debit payment networks, while in the UK the ‎vast majority of debit transactions are handled by Visa.

Lloyds' substantial stake in Visa Europe is partly a consequence of its takeover of HBOS during the 2008 financial crisis.

Visa Inc has been open about the likelihood of reuniting its US and European operations through a deal.

In a regulatory filing last month, Visa Inc said the price of a deal‎ "would likely be in excess of $10bn".

Visa Inc was itself a bank-owned association before becoming a listed company in 2008.

Buying Visa Europe, which processed more than 16bn transactions last year, would strengthen its position as the world's biggest payments group.

Both Visa entities declined to comment.