Discover share prices soar high after settlement with MasterCard and Visa Inc

Discover Financial Services Inc is likely to head to a better future and then too in the time of such a global economic meltdown. Day after the company has announced that it will receive a settlement worth $2.75 billion from MasterCard Inc. and Visa Inc, its share rosed high.

It can be remembered that the Discover sued credit card networks MasterCard and Visa in 2004 for harming its business by preventing banks that issued MasterCard and Visa cards from also offering Discover cards.Under the settlement agreement, Visa will pay $1.89 billion, the company said in a statement, while MasterCard said it will pay $862.5 million.

The company, under pressure as borrowing costs rise and loan losses increase, would use the proceeds to expand its domestic and global presence, as well as its deposits base, Chief Financial Officer Roy Guthrie said on a conference call with analysts. But Guthrie was reluctant to speak about acquisitions.

Discover has said in regulatory filings that it agreed to pay Morgan Stanley the first $700 million of proceeds it receives from a settlement, and half of any proceeds it receives above $1.5 billion, with a maximum potential payment of $1.5 billion.But Discover has said that Morgan Stanley is in breach of the agreement and the amount it will pay to its former parent was a matter of dispute.Guthrie declined to comment during the conference call about the Morgan Stanley lawsuit.

Source:Reuters

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