Visa 2008 Annual Report Download - page 122

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2008
(in millions, except as noted)
True-Up of Purchase Consideration
Under the terms of the reorganization, on March 17, 2008, each regional class and series of common stock was converted into class C common stock
(except in the case of class USA common stock which was converted into class B common stock) resulting in a reallocation of ownership among the
participating regions (the "true- up"). The conversion rate was based on each participating region's relative under- or over-achievement of its net revenue
targets during the four quarters ended December 31, 2007. The shares held by Visa Europe were not subject to the true-up.
As a result of the true-up, the ownership interest of the Visa U.S.A. member group in the Company was reduced by approximately 7%, with a
corresponding increase in the collective ownership interest of the other stockholders in the form of 26 million additional shares of class C (series I) common
stock received net in the conversion.
Under the guidelines of SFAS 141 the additional shares issued to these members were recorded as additional purchase consideration. These shares were
recorded at the true-up date at their fair value of $44 per share resulting in the recognition of $1.2 billion of additional purchase consideration as an increase to
goodwill and additional paid-in capital. The fair value of these shares was determined based on the price per share in the IPO. See Note 16—Stockholders'
Equity and Redeemable Shares.
Visa Inc. Common Stock Issued to Visa Europe
Visa Europe remained a separate entity owned and governed by its European member banks. Under the terms of the reorganization, Visa Europe
exchanged its membership interest in Visa International and Inovant for a put-call option agreement, a framework agreement (as described below) and the
following consideration:
• An 8.1% ownership interest in the form of all outstanding class EU (series I) and class EU (series III) common stock. The class EU (series I) and
class EU (series III) common stock participated equally and had the same rights as the class AP, class LAC, class CEMEA, and class Canada
common stock, except that it did not participate in the true-up of purchase consideration. The Company determined the fair value of this common
stock to be approximately $3.1 billion at the measurement date based on the value of the common stock issued to the acquired regions in
exchange for their historical membership interest in Visa International and ownership interest in Visa Canada.
• A 3.6% ownership interest in the form of all outstanding class EU (series II) common stock. All outstanding shares of class EU (series II)
common stock were converted on a one-to-one basis for shares of class C (series II) common stock at the time of the true-up. All outstanding
shares of class C (series II) common stock were redeemed by Visa Inc. on October 10, 2008 at a price of $1.146 billion adjusted for dividends
paid and other adjustments. The Company determined the fair value of this common stock to be approximately $1.104 billion at the
reorganization date by discounting the redemption price using a risk-free rate of 4.9% over the period to October 10, 2008. See Note 16—
Stockholders' Equity and Redeemable Shares and Note 4—Visa Europe for more information related to class C (series II) common stock and the
October 2008 redemption.
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