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Visa CFO talks Visa Europe integration, Brexit impact


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Visa CFO talks Visa Europe integration, Brexit impact

's integration of Visa Europe is underway, and it is "tooearly to determine" the longer-term impact of the U.K.'s decision to exit theEuropean Union on the latter'sbusiness,CFO Vasant Prabhu said during an earningsconference call.

Prabhusaid the weaker pound and euro will hurt revenues as reported in dollars, but asignificant portion of Visa Europe's expenses are denominated in pounds, offsettingthe negative revenue impact.

"Brexithas also introduced significant uncertainty, which is never good for business sentiment,"he said.

Prabhuadded that Visa Europe is performing as expected. Visa has started the employeeconsultation process in the U.K., required by law before any restructuring. Thecompany has also started a "technology harmonization" program and is moving to bringvarious services, including Visa Checkout, Visa Token Service, Visa Directand consulting resources, to European customers.

Thecompany expects Visa Europe earnings to offset interest expense from debt in thefiscal fourth quarter, assuming exchange rates stay at their current position andthere are no major economic dislocations as a result of Brexit. VisaEurope is expected to add 2% to 3% to EPS accretion in fiscal year 2017, Prabhusaid.

The CFO notedthat the company is also looking to make adjustments to its global cost base asit integrates the acquisition. Assuming plans are finalized, the company expectsto take a restructuring charge in the fourth quarter to resize its global cost structureas a result of the deal.

Visa Europe has more than $2 billionof cash on its balance sheet and, based on discussions with its regulator in theU.K., the company will leave this cash within the Visa Europe legal entity. Prabhusaid due to this action and the higher up-front cash consideration after the companyeliminated the earnout provision, Visa plans to issue at least $2 billion in debtbefore the end of 2016 to fund stock buybacks to offset dilution from preferredstock issued in the transaction.