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Fri, May 26, 2006 - Page 10 News List

MasterCard raises US$2.39bn in IPO


MasterCard Inc, the No. 2 credit-card association worldwide, raised US$2.39 billion in the second-biggest US initial public offering this year, selling a 46 percent stake.

The shares were priced at US$39 each MasterCard said in a statement on Wednesday. The company had expected a range of US$40 to US$43, as much as 16 percent more than a previous estimate.

MasterCard’s sale adds to the busiest market for IPOs in six years and follows the company’s report three weeks earlier that profit jumped 36 percent in the first quarter. Proceeds from the offering, which was delayed in February when chief executive officer Robert Selander had surgery for cancer, will be used to buy out 1,400 financial institutions that own the company.

“I’m surprised it priced below,” Francis Gaskins, president of IPOdesktop.com said. “It’s a lot of money to raise in this kind of market.”

MasterCard and 86 other US companies that went public this year raised US$21 billion, 59 percent more than the same period last year. The IPO market remains far from its peak year of 2000, when 169 companies raised US$36 billion through mid-May.

The IPO, the first for a major credit-card company since Capital One Financial Corp in 1994, is the second-biggest initial sale in the US this year, behind the US$5 billion Kohlberg Kravis Roberts & Co raised on May 2 for private equity fund KKR Private Equity Investors LP. That sale generated about three times more than planned.

MasterCard plans to give about 13.5 million shares, or 10 percent of equity, to the MasterCard Foundation, a charity incorporated in Canada. The donation, announced in March, may lead to a “significant loss’’ in the second quarter and for the full year 2006 because it will not be tax-deductible, MasterCard said earlier this year.

Most of the proceeds from the initial share sale will be used to repurchase shares, MasterCard said in yesterday’s statement.

It will retain US$650 million.

The IPO isn’t financing growth, Gaskins said. “That’s not a good sign.”

“The way MasterCard chooses to operate its network and operate its brand could be altered by going public," said David Robertson, president of Nilson Report, which tracks the credit-card industry. “They will be less beholden to financial institutions that are card issuers and more beholden to investors looking for a return."

Closely held Visa, which is owned by banks and other financial institutions, will remain the only global private credit-card association after MasterCard goes public.

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