MASTERCARD, INC. 
(Reuters) - Credit and debit card issuer Visa Inc (>> Visa Inc) said it was in talks to reunite with former subsidiary Visa Europe Ltd in a deal that would give the global company more scale to compete with arch-rival MasterCard Inc (>> Mastercard Inc).
Shares of Visa, which also reported a better-than-expected quarterly profit as its U.S. customers spent more, rose as much as 7.5 percent to $77.11 in extended trading.
Bloomberg reported in May that Visa was in talks to buy Visa Europe for up to $20 billion.
Visa Inc and Visa Europe, a cooperative of European banks with over 500 million cards, were part of a global bank-owned network until 2007. Most of the units merged to form Visa Inc, which went public in 2008, leaving Visa Europe as a separate entity.
Visa Europe had a 52.2 percent share of the Europe market in 2013 in terms of value of payments, according to its website. (http://bit.ly/1HVUjqe)
A deal would give Visa access to a market with lots of growth potential, KBW analyst Sanjay Sakhrani said. "There are many markets within Europe that are emerging markets, like Eastern Europe."
The Central and Eastern Europe, Middle East and Africa region accounts for nearly 4.8 percent of Visa's payment volumes. For MasterCard, Europe made up for about 26 percent of total purchase volume in the first quarter.
Visa has call options to buy Visa Europe shares, while the European company's members have put options to sell their shares to Visa.
A stronger dollar also makes the deal more attractive for Visa. The euro has fallen about 18 percent against the dollar in the past year.
Visa said on Thursday it expected to conclude talks on a possible "business combination" by the end of October and it would provide an update in its fourth-quarter results.
The company's U.S. payment volumes, which account for more than half of the total volume of transactions made on its cards, rose 8.7 percent in the third quarter ended June 30.
Net income rose to $1.70 billion, or 69 cents per Class A share, from $1.36 billion, or 54 cents per Class A share, a year earlier.
Excluding items, Visa earned 63 cents per Class A share.
Total operating revenue rose 11.5 percent to $3.52 billion.
Analysts on average had expected earnings of 59 cents per Class A share and revenue of $3.36 billion, according to Thomson Reuters I/B/E/S.
(Editing by Kirti Pandey)
By Sudarshan Varadhan and Neha Dimri
