August 31, 2005

Mastercard to sell shares to fight anti-trust case

by brian_turner

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Mastercard, the New York based credit card company, is planning to sell shares in an initial public offering (IPO) next year, to raise funds for possible legal costs related to an anti-competition case.

The company, which is owned by 1,400 member banks, will sell 49% of its equity to investors. These shares represent 83% of voting rights. Demand for the shares is expected to be strong as credit card companies are benefiting from increased consumer borrowing.

A Supreme Court ruled last year that Mastercard and Visa had breached anti-trust regulations by not allowing member banks to offer credit cards with rivals. The ruling led to American Express and Discover Financial suing Mastercard and Visa for damages. If the legal decision goes against Mastercard, the company could be liable for claims totalling many millions of dollars.

Mastercard plans to retain $50m (Â£360m) from the IPO.

The company said, in a statement: “We believe these resources will place us in position to defend our interests in the legal and regulatory arena”.

After the sale, Mastercard’s member banks will retain a 41% equity stake through non-voting class B shares. A new Mastercard charitable foundation will control 10% of the firm’s equity and the remaining voting rights.

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Story link: Mastercard to sell shares to fight anti-trust case

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