Capital Markets

Merchants Aim to Unwind MasterCard IPO

Fallout from an antitrust lawsuit may put its $2.4 billion offering at risk.
Stephen TaubJune 6, 2006

MasterCard International, already the target of an antitrust lawsuit brought by merchants, is on the receiving end of another legal challenge.

In a hearing before U.S. Magistrate Judge James Orenstein, who asked about appropriate remedies should the merchants prevail, attorney K. Craig Wildfang asserted, “We think the court would essentially be empowered to unwind the deal,” according to Bloomberg.

The “deal” in question is MasterCard’s $2.4 billion initial public offering — the second-largest IPO this year, the wire service noted.

Wildfang reportedly argued that last month’s offering was an improper attempt by MasterCard and its member banks to immunize themselves from antitrust liability. The merchants’ lawsuit, Bloomberg explained, alleges that MasterCard, Visa International, and banks conspired to inflate the processing fees that merchants pay to use their services.

“MasterCard thinks that the IPO is completely valid and it’s not going to be unwound,” Kenneth Gallo, a lawyer for the company, told Bloomberg in an interview outside the courtroom.

Even so, MasterCard planned to reserve $650 million from its IPO proceeds to cover expenses related to the lawsuit, according to a February report by the Associated Press.

Will that suffice? Bloomberg pointed out that in 2003, Visa and MasterCard agreed to pay $3 billion to settle a separate antitrust class-action lawsuit challenging their debit-card rules.