We advised Visa on the exchange offer

Davis Polk advised Visa Inc. on an SEC-registered exchange offer for its transfer-restricted Class B-1 and Class B-2 common stock. Approximately 98% of outstanding Class B-1 and B-2 shares, with an aggregate market value of approximately $60 billion, was tendered and accepted in the exchange. Tendering holders received an equal combination of freely tradable common stock that converts into Visa’s publicly traded Class A common stock when sold, and Class B-3 common stock that remains subject to transfer restrictions.

Class B-1 common stock was issued to Visa’s U.S. member banks in connection with its 2008 reorganization and IPO, in which Davis Polk advised the underwriters. The class was designed to facilitate the IPO by insulating public stockholders and non-U.S. member banks from liability stemming from certain legacy U.S. antitrust litigation. Class B-1 common stock is convertible into Class A common stock at a rate that adjusts downward as liabilities arising from the covered litigation are settled, although actual conversion will not occur, and the class remains subject to transfer restrictions, until all outstanding covered litigation is resolved. Since 2008, the Class B-1 common stock has appreciated in value more than ten-fold but the associated restrictions have remained in place longer than anticipated at the time of the IPO.

Class B-2 common stock was issued to holders that participated in Visa’s inaugural Class B-1 common stock exchange offer in 2024, in which Davis Polk also advised Visa, and is convertible into Class A common stock at a rate that similarly adjusts downward as liabilities arising from the covered litigation are settled, but at a pace double that applicable to the Class B-1 common stock. 

The Class B-3 common stock issued in the exchange offer is similarly convertible into Class A common stock at a rate that adjusts downward as liabilities arising from the covered litigation are settled, but at a pace double that applicable to the Class B-2 common stock (or four times that applicable to the Class B-1 common stock). 

As a condition to participating in the exchange offer, each holder entered into an agreement with Visa that obligates the holder to reimburse Visa for excess covered litigation liabilities if the value of the Class B-3 common stock is depleted through future conversion rate adjustments while the tendered Class B-1 or B-2 common stock, as applicable, owing to its slower conversion-rate adjustment mechanism, nevertheless would have retained value. Each holder also agreed to temporary restrictions on its ability to sell a portion of the freely tradable common stock it received in the exchange offer.

The Class B stockholder liquidity program, which was overwhelmingly approved by Visa’s common stockholders at its 2024 annual meeting, authorizes Visa to conduct additional exchange offers in the future that are similarly structured to provide Class B stockholders with liquidity while maintaining economically equivalent protection from liability related to the covered litigation for holders of Visa’s publicly traded common stock.

The Davis Polk corporate team included partners Joseph A. Hall and Mark J. DiFiore, counsel John H. Runne and Marc D. Swenson, and associates Jakub P. Jozwiak and Yusuke Tsuzuki. Partner Corey M. Goodman and associate Bradford Sherman provided tax advice. All members of the Davis Polk team are based in the New York office.

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