MasterCard International has had a long-standing alliance with Europay, and currently owns a 12.2 per cent share of Europay, and a 15 per cent interest in EPSS, Europay's processing subsidiary. In addition, MasterCard and Europay each own fifty per cent of global online debit program Maestro.

Peter Hoch, Europay chief executive officer, says the integration of the two companies is the logical consequence of worldwide trends in consolidation and globalisation, particularly in the payments industry. "Together, MasterCard and Europay will have increased strategic flexibility, improved economies of scale, strengthened consumer recognition and shorter time-to-market for innovative products and services," he says.

Under the proposal, MasterCard would convert from a membership corporation to a private share corporation, MasterCard Incorporated, with MasterCard principal members and Europay shareholders becoming equity owners. The conversion to a private share corporation would facilitate the transaction with Europay, which is a private share corporation. It is also expected to more closely align the interests of MasterCard with those of its member-stockholders, because the value created by MasterCard for its member-stockholders will be reflected directly in the value of their shares.

Following completion of the transaction, Europay staff would provide the framework for the European region of MasterCard, which will continue to be based in Waterloo, Belgium. Hoch will retain his leadership role for the region and will report to MasterCard president and CEO Robert Selander. As with all MasterCard regions, the European region will have its own board, which will make decisions on regional issues consistent with MasterCard's global strategy.

"In Europe, financial institutions continue to have the choice to promote the well-recognised Eurocard name along with the MasterCard brand, if they consider it appropriate for their markets," says Hoch.

The integration of MasterCard and Europay proposal will now be submitted to their respective constituents for approval. MasterCard's share conversion will be subject to approval by a majority of MasterCard International's principal members, and each Europay shareholder will be asked to agree to exchange its shares in Europay for shares of MasterCard Incorporated, in connection with the integration.

Both transactions are subject to customary closing conditions, including the receipt of necessary regulatory approvals. MasterCard will soon file a registration statement with the Securities and Exchange Commission to effect the conversion to a private share corporation.

Upon completion of the transaction, MasterCard's principal members and Europay shareholders will receive shares in MasterCard Incorporated, the new holding company, and a membership interest in MasterCard International, which will continue as MasterCard Incorporated's principal operating subsidiary.