Visa and Plaid have terminated their $5.3bn acquisition agreement after US authorities filed a legal challenge against the deal.
Visa announced a year ago today that it planned to acquire Plaid, a start-up that builds APIs for open banking, at more than twice the valuation it previously had.
However, the US Department of Justice filed an antitrust suit in November to block the deal from going ahead, arguing that the merger would stymie competition.
‘It has been a full year since we first announced our intent to acquire Plaid, and protracted and complex litigation will likely take substantial time to fully resolve’
– AL KELLY
Al Kelly, Visa’s chief executive, said the decision to terminate the deal was made to avoid a drawn-out legal case. But he added that he believes Visa and Plaid would have won the legal challenge as “Plaid’s capabilities are complementary to Visa’s, not competitive”.
“We believe the combination of Visa with Plaid would have delivered significant benefits, including greater innovation for developers, financial institutions and consumers,” he said.
“However, it has been a full year since we first announced our intent to acquire Plaid, and protracted and complex litigation will likely take substantial time to fully resolve.”
Plaid develops the handrails for open banking, allowing bank customers to link up their accounts with other services such as apps by challenger banks.
Zach Perret, chief executive of Plaid, said Visa will be an investor and partner for the company going forward. The start-up has raised more than $300m from investors including Goldman Sachs, Andreessen Horowitz and Google’s GV.
“This past year saw an unprecedented uptick in demand for the services powered by Plaid, and our priority is to support the hundreds of millions of people who now rely on fintech,” Perret said. “We made great strides last year, growing our customers by more than 60pc and adding hundreds of banks to our platform.”
The Department of Justice had argued that Visa is a “monopolist in online debit services” and Plaid presented a challenge to that monopoly. It will now drop the lawsuit.
“In a victory for American consumers and small businesses, Visa has abandoned its efforts to acquire an innovative and nascent competitor,” assistant attorney general Makan Delrahim said.
The legal challenge raises the prospect of increased regulatory scrutiny of fintech deals in the future.
However, Visa’s biggest rival Mastercard successfully closed its $825m acquisition of Finicity, another open banking start-up, in November. Mastercard received Department of Justice approval for the deal in the same month that the department filed suit against Visa and Plaid.
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