Visa 2014 Annual Report Download - page 44

present challenges to our business due to increasing costs and difficulty in maintaining the
interoperability of our respective systems. Any inconsistency in the payment processing services and
products between Visa Europe and us could negatively affect account holders from Visa Europe using
payment products in the countries we serve or our account holders using payment products in Visa
Europe’s region. Failure to authorize, clear and settle inter-territory transactions quickly and accurately
could harm our business and impair the global perception of our brands.
Structural and Organizational Risks
Due to the nature of our relationship and the terms we have agreed to with Visa Europe, we
have little ability to control its operations in its region, and as a result, we may experience
added costs and challenges in operating our business.
Visa Europe’s exclusive license of our trademarks and technologies under the Framework
Agreement gives us little ability to control and oversee Visa Europe’s operations in its region. If we
want to change a global rule or to implement certain changes that may be viewed as unfavorable to
Visa Europe and its members, Visa Europe is not required to implement the changes unless we agree
to pay for the associated implementation costs. This may result in added costs and expenses to our
business. Furthermore, the licenses granted under the Framework Agreement may raise licensing,
payment and associated tax treatment concerns.
Visa Europe may hinder our ability to acquire new businesses or to operate them effectively in its
region. If the acquired business has operations in Visa Europe’s region, Visa Europe may play a
significant part in influencing our ongoing operational decisions and costs there. Finally, Visa Europe
may undertake operational and litigation strategies, including, but not limited to, our ongoing litigation in
the U.K. and our ongoing case with the European Commission, that may adversely impact our
business and reputation globally.
If Visa Europe makes us acquire all of its outstanding stock under its put option, we are likely
to incur substantial costs and may suffer a material and adverse effect on our operations and
net income.
We have granted Visa Europe a put option, which Visa Europe can exercise at any time and which
would require us to purchase all outstanding capital stock from Visa Europe’s members within 285
days. Given current economic conditions, the purchase price under the terms of the put option could
likely be in excess of $10 billion dollars and we may need to obtain third-party financing in order to
meet our obligation through the issuance of either debt or equity. An equity offering, or the payment of
part of the exercise price with our stock, would dilute the ownership interests of our stockholders. See
—Future sales of our class A common stock, or the end of transfer restrictions on our class B common
stock, could result in dilution to holders of our existing class A common stock, which could adversely
affect their rights and depress the market price of our class A common stock.
Sufficient financing might not be available to us within that time on reasonable terms. See Note
2—Visa Europe to our consolidated financial statements included in Item 8 of this report. In addition,
we are required to assess any change in the fair value of the put option on a quarterly basis and record
adjustments as necessary on our consolidated statements of operations. Consequently, the
adjustments affect our reported net income and earnings per share. These quarterly adjustments and
their resulting impact on our reported statements of operations could be significant. The existence of
these changes in the fair value of the put option could adversely affect our ability to raise capital and
increase any associated costs.
If we acquire Visa Europe, we may also encounter difficulties in integrating Visa Europe’s business
and systems into our existing operations. If we cannot do so quickly and cost-effectively, the integration
could divert the time and resources of senior management and other key resources, disrupt our current
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