Visa Negotiating to Acquire Full Control of Plus Network
NEW YORK - Looking to bolster its debit-card business, Visa U.S.A. is negotiating to acquire control of the Plus network of automated teller machines, according to D. Dale Browning, the network's president.
Buyout discussions have been held over the past five months, and a Visa proposal may go to the Plus board in early 1992, Mr. Browning said in an interview last week.
Visa acquired one-third of the equity in Denver-based Plus System Inc. in 1987 for $3.5 million. That pact gave the card association a third of Plus' board seats and an option to buy the ATM network outright.
Similar to Cirrus Deal
Any deal is likely to be similar to the one MasterCard International struck in 1988 for Cirrus, the competing national ATM network. MasterCard paid about $35 million to the six banking companies that owned Downers Grove, Ill.-based Cirrus System Inc. Visa would probably offer a comparable sum to the 62 banking companies that own Plus' stock.
Cirrus had 25,362 ATMs at the time of its purchase and has since grown to 55,000 in the United States and Canada and 10,000 in other countries. Plus - established in 1982 like Cirrus - links 42,851 ATMs of more than 4,400 U.S. banks, and 15,344 machines abroad.
A spokesman for San Mateo, Calif.-based Visa said "these are not new discussions. We have the option to purchase Interlink through 1997 and that option is still in place."
$1.5 Million for the Name
Under its existing pact with Plus, Visa has the right to acquire the remainder of the company if both companies believe competitive pressures require it. Visa has already obtained the right to use the Plus name internationally. For that right it paid $1.5 million after buying the original $3.5 million stake.
Visa is now intent on building a formidable point-of-sale business for its debit card, enabling consumers to use their ATM cards to pay for goods and services.
"If Plus was part of Visa's debit-card strategy, that strategy would have more of a likelihood of success," Mr. Browning said. In the United States, more than 136 million cards have been issued bearing the Plus logo.
Questions regarding the network's management structure, its autonomy, and its role in Visa's future have played a bigger role in the discussions than price, Mr. Browning said.
"We need to figure out how to implement Plus into the Visa strategy in a way that benefits Plus' members," he said.
Mr. Browning said he was impressed by the Cirrus-MasterCard agreement because it allowed Cirrus to become a wholly owned subsidiary with its own board.
"It was very beneficial for both MasterCard and Cirrus to keep Cirrus more of an independent entity with its own board that could not be compromised by the MasterCard board," Mr. Browning said. "I feel very strongly about that issue. You have to protect the integrity of each product you offer."
He added: "I just hope Visa would structure Plus in a fashion that would make Plus somewhat accountable for the success of the debit-card strategy and they would dedicate technical resources to it."
Plus is now governed by a 24-person board. Two-thirds of the directors are elected by the network's owner's, with the remainder appointed by Visa.
Visa signaled its commitment to the debit-card business earlier this year when it agreed to buy Interlink, a large point-of-sale network in the West serving 12 million cardholders. The card association plans to make the Interlink service available to retailers and consumers nationwide.
Visa's debit efforts would benefit from a closer alliance with Plus because of the network's relationships with the retail banking executives of its members, Mr. Browning said. Those executives are often not the same people directly responsible for credit card programs.
An agreement would also help the two organizations strengthen their international ATM businesses.
While Visa uses Plus as its service mark for ATMs worldwide, Visa oversees the international machines and Plus has responsibility for the United States.
"As Plus gains internationally, it's more important that there is cooperation between the domestic and international businesses," Mr. Browning said.
Visa Should, Say Execs
Other payment systems executives agree that Visa would do well to exercise its option to acquire 100% of Plus.
"They probably should," said Alex W. Hart, president of MasterCard International in New York. "I'm sure glad we bought Cirrus. It was an excellent buy for us and has given us a tremendous advantage in many parts of the world."
Cirrus has long had a much larger presence in Europe than Plus, he said.