Visa 2008 Annual Report Download - page 40

Table of Contents
under the put option is based upon a formula that, subject to certain adjustments, applies the 12-month forward price-to-earnings multiple applicable to our
common stock at the time the option is exercised to Visa Europe's projected sustainable adjusted net operating income for the same 12-month period. Upon
exercise of the put option, we will be obligated, subject only to regulatory approvals and other limited conditions, to pay the purchase price within 285 days in
cash or, at our option, with a combination of cash and shares of our publicly tradable common stock. The portion of the purchase price we will be able to pay
in stock will initially be limited to the percentage of our class C (series I) common stock that at the settlement date remains subject to the transfer restrictions.
We must pay the purchase price in cash, however, if the settlement of the put option occurs after March 25, 2011.
We will incur a substantial financial obligation if Visa Europe exercises the put option. The amount of that potential obligation could vary dramatically
based on, among other things, the 12-month projected sustainable net operating income of Visa Europe, the allocation of cost synergies, the trading price of
our class A common stock, and our 12-month forward price-to-earnings multiple, in each case, as determined at the time the put option is exercised. We are
not currently able to estimate the amount of this obligation due to the nature and number of factors involved and the range of important assumptions that
would be required. However, depending upon Visa Europe's level of sustainable profitability and/or our 12-month forward price-to-earnings multiple at the
time of any exercise of the option, the amount of this obligation could be several billion dollars or more. We may need to obtain third-party financing, either
by borrowing funds or undertaking a subsequent equity offering, in order to meet our obligation. This financing may not be available to us in a sufficient
amount within the required 285-day period or on terms that we deem to be reasonable. The payment of part of the exercise price in stock would dilute the
ownership interests of our stockholders. Moreover, the acquisition of Visa Europe following an exercise of the put option would require us to integrate the
operations of Visa Europe into our business, which could divert the time and attention of senior management.
The fair value of the put option at September 30, 2008 was $346 million. We are required to record any change in the fair value of the put option on a
quarterly basis. These adjustments will be recorded through our consolidated statements of operations, which will therefore impact our reported net income
and earnings per share. Such quarterly adjustments and their resulting impact on our reported statements of operations could be significant. The existence of
these charges could adversely affect our ability to raise capital and/or the price at which we can raise capital. See Item 9B—Other Information.
Our reorganization requires us to make significant changes to our culture and business operations. If we fail to make this transition successfully, our
business could be materially and adversely affected.
Our reorganization has required broad and significant changes to our culture and operations. Historically, the primary goal of Visa U.S.A., Visa
International and Visa Canada has not been to maximize profit for these entities, but rather to deliver benefits to their members and enhance member
opportunity and revenue. As a result of the reorganization, we now must operate our business in a way that maximizes long-term stockholder value. Many of
our employees have limited experience operating in a profit-maximizing business environment.
In addition, the Visa enterprise historically has been operated under a decentralized regional structure, and each region has had substantial autonomy in
its own business strategies and decisions. Our reorganization has resulted in a more centralized corporate governance structure in which our board of directors
exerts centralized management control. We face significant challenges integrating the operations of the different regions. We may also be unable to retain and
attract key employees, and we may not realize the cost savings and operational efficiencies that we currently expect. This transition will be subject to risks,
expenses and difficulties that we cannot predict and may not be capable of handling in an efficient and timely manner.
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