Co confirms that it has reached an agreement to drop Visa as a defendant in a lawsuit alleging that MasterCard, Visa and their member banks had illegally blocked AXP from the bank-issued card business in the United States. Under terms of the settlement agreement, Visa will pay a maximum amount of $2.25 bln to AXP. Individual banks named in the lawsuit will also be dropped as defendants. These include: J.P. Morgan Chase, Capital One, U.S. Bancorp, Wells Fargo and Providian. The agreement is subject to the approval of Visa's member banks.
Under terms of the agreement reached with Visa, Inc., Visa USA, and Visa International, AXP will receive an aggregate maximum payment of $2.25 bln.
An initial payment of $1.13 bln will likely be recognized by AXP in income during the fourth quarter 2007. The remainder, payable in installments of up to $70 mln per quarter over the next four years, is subject to achieving certain quarterly performance criteria within the U.S. network services business of AXP. In light of the settlement, AXP said that it is likely to incur a number of significant additional fourth quarter expenses, including: Incremental investments in marketing, promotion, rewards, cardmember services and other business building initiatives designed to capitalize on competitive opportunities in the payments industry at a time when some competitors are pulling back. Additional funding for the AXP Foundation, which will support the company's ongoing philanthropic activities. Litigation expenses related to the lawsuit against Visa and MasterCard. This settlement was announced earlier today on CNBC, see 11:08 comment.