Just six months after Morgan Stanley Dean Witter & Co. surprised the card industry by launching a MasterCard program in the United Kingdom, the firm has struck again, stepping in with a bid for the U.K. Visa portfolio of Bank One's First USA division.

Sources said First USA is also looking for a buyer for its Canada operations.

According to sources familiar with the companies, Morgan Stanley, which operates through the Discover card in the United States, had locked up the acquisition of the United Kingdom business by late last week. The U.K. deal would nearly double Morgan Stanley's credit card presence in that market.

Since Morgan Stanley launched its program last September, it has amassed about 150,000 MasterCard customers in the United Kingdom. The addition of First USA's portfolio and its call center in Cardiff, Wales, would give Morgan Stanley a much-needed boost in this already crowded market.

First USA would not disclose how much it has in receivables in the United Kingdom, but Cards International, a worldwide newsletter on the plastic cards industry published by Lafferty Publications Ltd., said First USA has gotten about 100,000 customers there since it began operations in December 1998.

That First USA would sell the international portion of its massive card portfolio came as no surprise to industry observers. The company, which is the second-largest issuer worldwide, had signaled it was reviewing its operations abroad as it works to fix its beleaguered business.

"This is not an unexpected event," said Robert Hammer, president of R.K. Hammer Investment Bankers in Thousand Oaks, Calif. "Any organization that's going through what they are now would go through a triage of what's core and what's not core, and out-of-country accounts is one of those that would have risen to my list."

William Boardman, a Bank One vice chairman and head of First USA, said last month that the company is evaluating its businesses in the United Kingdom and Canada. "That environment has become extremely competitive, extremely fast," he said.

Both First USA and Morgan Stanley declined to comment. Word of a potential sale of First USA's U.K. Visa business to Morgan Stanley was first reported Friday in Financial Times.

New York-based Morgan Stanley surprised the industry last August when it announced plans to enter the U.K. card market with a Morgan Stanley-branded MasterCard, instead of its flagship Discover brand. At that time, the company said it planned to roll out the Morgan Stanley Dean Witter card to other markets.

Both Visa U.S.A. and MasterCard have rules preventing their U.S. member banks from forming partnerships with American Express Co. and Discover, but those regulations do not apply abroad. Discover Financial Services, Morgan Stanley's card subsidiary in Riverwoods, Ill., said it decided to team up with MasterCard and its Europay affiliate, instead of trying the costly and difficult task of building up its Novus infrastructure abroad.

Analysts said Morgan Stanley would most probably change the First USA Visa cards into MasterCard accounts when they reissue them to their customers.

Morgan Stanley may have been willing to pay a larger premium than competitors because it needs to "play catch-up" in the United Kingdom, said David Robertson, president of The Nilson Report, an industry newsletter in Oxnard, Calif. "They're late going into that market, and this is a way for them to gain share."

Christopher Staab, managing associate at Auriemma Consulting Group in Westbury, N.Y., said First USA may have opted not to sell to a direct bank card competitor from the United States.

"The principal people you would think would be interested in it from the U.S. perspective would be MBNA and Citi," Mr. Staab said. "But if you're going to sell, why sell to your two main competitors in the U.S. and let them know what you're doing?"

First USA's business would be a nice springboard into Canada, analysts said, though Morgan Stanley should not expect the same sort of scale there is in the United States or England.

"Canada is still a small market," Mr. Staab said. "The top four banks there own 67% of the total credit card outstandings."

Industry experts said Morgan Stanley could make inroads in these markets through its unique cash-back rebate feature. The cards in the United Kingdom come with a 1% cash rebate on purchases, no annual fee, and teaser rates for balance transfers. The classic card has an introductory rate on balance transfers of 6.9% which jumps to 17.9% after six months. The platinum card has an intro rate of 4.9% which jumps to 16.9% after five months.

"Discover's proposition with the rebate can carve out a nice niche in that market because no one else owns that space," said William Keenan, president of De Novo Corp. in Hockessin, Del.

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