IPO VIEW-Bank owners counting on big payday from Visa IPO
By Lilla Zuill
NEW YORK, March 14 (Reuters) - Turmoil has chilled the U.S. market for initial public offerings but it is unlikely to stop Visa Inc's attempt to burn its name into the IPO record books when it comes to market next week.
U.S. stock markets nosedived on Friday with the S&P 500 index .SPX losing more than 2 percent, dragged down by a sudden cash crunch at Bear Stearns Cos BSC.N that forced the Federal Reserve to intercede.
Against that backdrop, Visa is steaming ahead to list its shares on the New York Stock Exchange under the symbol "V" (V.N). The listing is expected on Wednesday.
Visa's banking owners -- who stand to reap in the region of $10.2 billion in the offering -- may be pushing for the IPO's launch, analysts said.
"It is all the more critical that this happens now," said Francis Gaskins, president of research firm IPOdesktop.com.
Under Visa's plans, 406 million class A common shares will be sold to the public for between $37 and $42 apiece, raising between $15 billion and $17 billion, or more if demand is there.
It is seen as largest-ever U.S. IPO, and second worldwide to Industrial & Commercial Bank of China Ltd (601398.SS) which raised $22 billion in 2006, according to Reuters Data.
Hopes are high for Visa's IPO with it following a more than fourfold jump in shares for smaller rival Mastercard Inc's (MA.N) 2006 IPO, which raised $2.4 billion.
"(Plans for Visa's deal) started long before anyone heard the words 'subprime crisis' but now all those banks could use a big payday," said David Robertson, publisher of the Nilson Report, a semimonthly credit card industry trade journal.
The rich payday from Visa's IPO could prove timely for bank owners, with mounting credit losses plaguing many lenders.
JP Morgan Chase & Co, which has not been as badly hit by the credit crisis as some Wall Street peers stands to be $1 billion richer from the IPO.
A BLESSING?
The offering could prove a blessing for Bank of America Corp (BAC.N), which could see proceeds of up to $600 million, and up to $260 million for Citigroup (C.N), both of which have recorded large write-downs as a result of the subprime mortgage and credit crisis. [nN14415880]
Underwriters, led by JP Morgan (JPM.N) and Goldman Sachs (GS.N), also could gain hefty fees from the deal, which could help make up for a 55 percent drop in IPO activity versus the same time last year, according to Renaissance Capital's IPOhome.com.
The Visa deal is expected to generate fees of $500 million, or more if well received. [nN14418248]
"Unless there is bank failure after bank failure in the next few days I would expect Visa to come," said Scott Sweet, managing director of IPOboutique.com.
MasterCard's stock was little touched by Friday's stock market woes, Sweet added.
Visa and MasterCard are not directly exposed to rising defaults and late payments consumers because they process transactions unlike rivals American Express Co (AXP.N) and Discover Financial Services (DFS.N) which issue cards.
MasterCard closed down $1.07, or 0.5 percent, at $208.65 on Friday. That company's market value is about $27 billion.
Visa's price-to-earnings ratio is 19 times its annualized fourth-quarter earnings compared to 21.5, according to IPdesktop's Gaskins.
"There are people who think it is going to in short order match MasterCard's price," said Gaskins. "But I don't think that is logical."
He sees Visa growing at a less dramatic clip given its much-larger size, which is likely to be expressed in Visa tracking a steady, but less dramatic stock rise.
Global card transaction volume may increase about 11 percent a year through 2012, with fastest growth outside the United States, according to Robertson's Nilson report.
Visa, under a pre-IPO reorganization, separated from Visa Europe, which continues as a member-based organization, cutting Visa Inc investors off from gains in much of Europe, Robertson said.
Some see that as putting Visa at a disadvantage to MasterCard but Visa Inc Chief Executive Joseph Saunders said that Visa Europe, under an agreement, could join the fold.
"That will be accretive to Visa Inc," he said, in a road show presentation, as he embarked on a round-the-world trip to woo investors in 14 countries. (Reporting by Lilla Zuill, editing by Leslie Gevirtz)
