MasterCard plans flotation to help it fend off lawsuits

MasterCard has unveiled plans for a flotation of at least $650m (£360m) next year that will convert it into an independent public company, partly in an effort to protect its 1,400 bank owners from antitrust lawsuits.

The world's second-largest credit card association said yesterday the float would give outside investors 49 per cent of the equity and 83 per cent of the voting rights. Its existing owners, 1,400 financial institutions including major British banks such as HSBC, will retain a 41 per cent holding but lose some voting rights.

In a filing with the US Securities and Exchange Commission, MasterCard said the move would "lead us, and our customers, to a more stable base from which to execute our strategy and bring value to customers' businesses".

MasterCard and its larger rival Visa face pressure from regulators and retailers over the so-called interchange fees that their bank members impose on merchants for processing card transactions. In June, a group of US retailers filed a class-action lawsuit against both credit card associations and some of the member banks, claiming the fees were too high.

Michael Lafferty, the chairman of the card consultancy firm Lafferty Group, said MasterCard's move was "intended to protect its member issuers and acquirers from further antitrust lawsuits on matters like alleged collusion on interchange fees. European banks in particular are very worried about their exposure to damages from class-action lawsuits in the US."

He said the planned flotation was also an attempt to modernise MasterCard's governance structure and would allow it to offer valuable share options to its executives. "Visa is now under pressure to modernise its complex half-mutual and half-corporate global structures," he said. Mr Lafferty is the chairman of the International Cards and Payments Council, a global forum for the cards industry.

MasterCard said it would pass on some of the proceeds of the flotation to bank members but would retain $650m partly to cover potential legal costs.