Under pressure from dissident shareholders over company strategy, Morgan Stanley chairman and chief executive Philip Purcell has announced plans to spin off the Discover credit card unit.
The decision to spin off the unit marks a reversal for the embattled Purcell, who is facing calls for his replacement from a group of eight former Morgan Stanley executives. The group have been waging a public war to oust Purcell following a top-level management reshuffle last week.
Purcell had previously resisted calls to divest Discover, which is expected to grow its revenues as a result of legal victories last year that forced MasterCard and Visa USA to allow member banks to issue competitors' cards, and from its recent acqusition of the Pulse EFT network.
"The two businesses compete in two different arenas. It's the right time for Discover to be on its own given the new opportunities for the brand and its network," Purcell said in a conference call late Monday. "Discover can deliver more shareholder value to our investors as a stand-alone entity."
Analysts estimate the value of the business - which lays claim to more than 50 million cardmembers and $48 billion in managed loans - at anywhere between $8 billion and $13 billion.
The announcement forced Visa to cancel a scheduled hearing with European Commission competition offficials over an ongoing dispute with Morgan Stanley and Discover. The global credit card company had been due to air its case for its continued exemption of Morgan Stanley from its European network.
In a statement, Visa Europe said "the current state of uncertainty" over the Discover card business had led to its withdrawal.
Hans van der Velde, Visa Europe president and CEO said in the statement: "It was like asking us to deal with a moving target."