MasterCard yesterday unveiled plans for an initial public offering (IPO) to help reshape its business during a time of unprecedented competitive...
NEW YORK — MasterCard yesterday unveiled plans for an initial public offering (IPO) to help reshape its business during a time of unprecedented competitive and legal challenges mounted by rivals.
The Purchase, N.Y.-based credit-card association is controlled by 1,400 financial institutions that issue MasterCard-branded products. The IPO is expected in next year’s first quarter, and will transfer a 49 percent equity stake and voting control into the hands of investors.
The move comes as MasterCard and larger rival Visa USA contend with a court decision that allows member banks — for the first time — to issue competing card brands of companies such as American Express and Discover Financial Services. This opened the door for those companies to file lawsuits against the two credit-card giants seeking unspecified damages stemming from anti-competitive practices.
An unfavorable verdict could cost MasterCard and Visa hundreds of millions of dollars as suits filed under antitrust laws can seek triple damages. MasterCard Chairman Baldomero Falcones and President and Chief Executive Officer Robert Selander said in a letter to member banks the IPO was in part formulated to address these legal hurdles.
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“We will retain $650 million of the IPO proceeds to fund a capital increase, the economic impact of which will be borne by our U.S. shareholders,” the letter said. “Along with the proposed structural changes, we believe these resources will place us in a position to defend our interests in the legal and regulatory arena.”
An IPO for MasterCard comes as the credit-card industry is being swept by another wave of consolidation. Bank of America agreed to acquire MBNA for $35 billion, while Washington Mutual is close to completing its acquisition of Providian Financial. Other independent credit-card issuers are said to be possible takeover targets by larger financial institutions.