We advised Visa on the design and implementation of its Class B stockholder liquidity program and inaugural exchange offer

Davis Polk advised Visa Inc. on the design and implementation of a program to provide liquidity to its Class B stockholders, a group primarily made up of U.S. financial institutions issuing Visa-branded credit and debit cards at the time of Visa’s 2008 IPO and who today count among Visa’s largest card-issuing customers. The program’s inaugural transaction consisted of an SEC-registered exchange offer for Visa’s transfer-restricted Class B-1 common stock. Approximately 98% of the class, with an aggregate market value in excess of $100 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-2 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.

The Class B-2 common stock issued in the exchange offer 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. 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-2 common stock is depleted through future conversion rate adjustments while the Class B-1 common stock, owing to its slower conversion-rate adjustment mechanism, nevertheless retains 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, Phillip R. Mills, Mark J. DiFiore, Ken Lebrun and Emily Roberts, counsel John H. Runne and Marc D. Swenson and associates Jakub P. Jozwiak and Shukra Sabnis. Partner Corey M. Goodman and associate Bradford Sherman provided tax advice. The financial institutions team included partners Margaret E. Tahyar and Eric McLaughlin and associate Andrew Rohrkemper. Members of the Davis Polk team are based in the New York, Northern California and Tokyo offices.