MasterCard, Amex Settle for $1.8B

Updated from 9:54 a.m. EDT

MasterCard(MA Quote - Cramer on MA - Stock Picks) on Wednesday agreed to pay $1.8 billion to settle litigation brought by American Express(AXP Quote - Cramer on AXP - Stock Picks), which had alleged the company conspired to keep it out of the lucrative bank-issued credit card market.

The agreement calls for MasterCard to pay 12 quarterly payments of $150 million, contingent on the performance of its U.S. Global Network Services business, beginning in the third quarter. Competitor Visa(V Quote - Cramer on V - Stock Picks), another defendant in the suit, settled its share for $2.25 billion in November.

"We are pleased to have reached a settlement with terms that will enable us to keep our strong balance sheet intact, so we can continue to build on our exceptional business results and vigorously pursue our strategy," said MasterCard President and CEO Robert Selander. "Eliminating the uncertainty, time commitment, and expense of a prolonged court case is in the best interest of our shareholders, our customers and our management team."

On a tax-affected net present value basis, MasterCard's settlement payments are expected to total $1 billion. The company said it will take a charge in that amount in the second quarter.

The $4.05 billion American Express expects to receive from the two credit card networks is the largest combined antitrust settlement in U.S. history, the company said. The settlement payments from the two companies represent $880 million annually for American Express over the next three years, starting in the third quarter of 2008 and running through the middle of 2011. American Express would receive two subsequent quarterly payments of up to $70 million from Visa in the latter half of 2011.

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