MarketWatch.com - Pre-Market Indications

Tuesday, March 18, 2008

Visa IPO not effected by real estate mess

Visa IPO: analysts

Market turmoil will not stop Visa IPO: analysts

By Lilla Zuill Mon Mar 17, 2:04 PM ET

NEW YORK (Reuters) - Visa Inc, which plans to float its shares on the New York Stock Exchange on Wednesday in the biggest U.S. initial public offering ever, will not be deterred by market turmoil that has taken a severe toll in recent days, analysts said on Monday.

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"I do hear that the deal is on and is expected to be strong," said Sal Morreale, who tracks IPOs for Cantor Fitzgerald in Los Angeles.

Visa has filed to sell 406 million Class A common shares at $37 to $42 apiece, for proceeds of $15 billion to $17 billion.

If demand is strong, an additional 40 million shares could sell, pushing proceeds as high as $19 billion. Even at the low end of expectations, the IPO would set a record in the United States, beating out AT&T's $10.6 billion deal in 2000.

Morreale said underwriters, led by JPMorgan (JPM.N) and Goldman Sachs & Co (GS.N), were under pressure to pull off the deal, or risk spooking investors who are already on pins and needles after Bear Stearns Cos (BSC.N) on Sunday averted a near-collapse by agreeing to be sold for a fire-sale price.

The deal could produce a windfall for cash-strapped banks. Based on the mid-range of Visa's expected IPO price, about $10.2 billion of proceeds would go to large Visa stockholders that include JPMorgan, National City (NCC.N), Bank of America (BAC.N) and Citigroup (C.N).

The IPO could also provide a boost for investment banks, which get fees from underwriting deals, after the market for U.S. initial public offerings all but came to a standstill in recent months, as the growing credit crisis prompted investors to withdraw.

Visa's IPO could generate around $500 million in fees for underwriters, according to an amended registration statement with the U.S. Securities and Exchange Commission.

"A lot of the firms are struggling right now," said Morningnotes.com analyst William Wilson. "They really need this jump-start."

Wilson said he also expected Visa to proceed with its IPO. An underwriter on the deal confirmed the IPO is expected to price after Tuesday's market close, with the shares debuting on the New York Stock Exchange on Wednesday.

Investors have been eager to grab shares in Visa's offering as smaller rival MasterCard Inc's (MA.N) stock has more than quadrupled in value since its May 2006 IPO.

MasterCard shares, which have largely been untouched by the turmoil affecting the wider market in recent months, were trading down nearly 7 percent at $194.42 on Monday.

MasterCard and Visa are not directly exposed to rising defaults and late-paying consumers because they process transactions, while rivals American Express Co (AXP.N) and Discover Financial Services (DFS.N) issue cards, extending credit to cardholders.



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