Nuvei Corp.’s NVEI-T stock soared Monday after confirming news reports that the Montreal digital payments processing company, which counts celebrity actor Ryan Reynolds as a shareholder and spokesman, is in talks that could lead to a takeover.
Its stock gained 32 per cent on the Toronto Stock Exchange and Nasdaq, after Nuvei said in a release late Sunday it “is engaged with discussions with certain third parties in connection with a potential transaction involving continued significant ownership by certain of the holders of multiple voting shares” including chair and chief executive Phil Fayer. He owns 27.9 million multiple voting shares, representing 20 per cent of outstanding shares and 33.8-per-cent voting control of the company. Nuvei further said its board had formed a special committee of independent directors to evaluate strategic alternatives after receiving “expressions of interest.”
The announcement follows a weekend report in The Wall Street Journal that Boston-based private-equity firm Advent International Corp. was in advanced talks concerning a potential transaction with Nuvei, which had a market capitalization of US$3-billion at Friday’s close.
The language in Nuvei’s release suggests a potential deal could see Mr. Fayer, and possibly the two other large multiple voting stockholders, Quebec private-equity firm Novacap and pension giant Caisse de dépôt et placement du Québec, roll over some of their stock in a takeover should one occur. That has happened in other buyouts, including last year’s takeover of Waterloo’s Magnet Forensics by private-equity giant Thoma Bravo.
National Bank of Canada Financial Markets analyst Richard Tse said he wasn’t surprised to see Nuvei in play, given continuing consolidation among digital payments processing companies and the fact it traded at a 30-per-cent discount to industry peers. “It sticks out as a potential candidate for value-focused acquirers.”
No deal has been signed and “there can be no assurance” one will materialize, the company said. If a transaction happens, Nuvei would become the eighth Canadian technology company out of the 20 that went public on the Toronto Stock Exchange during a flurry of COVID-19-era offerings in 2020 and 2021 to reprivatize.
Six others have gone private through buyouts – BBTV Holdings Inc., Dialogue Health Technologies Inc., Farmers Edge Inc., Magnet Forensics Inc., MindBeacon Holdings Inc. and Q4 Inc. A seventh, automotive marketplace provider E Inc., delisted from the TSX.
Two TSX-listed tech companies that went public during the dot-com boom, Absolute Software Corp. and mdf commerce inc., have also agreed to buyouts in the past year.
Like many other tech companies, Nuvei’s stock has sold off since late 2021, when fears of rising interest rates, later realized, slammed the sector. Its stock closed Friday at US$21.76 on Nasdaq, well below its 2020 initial public offering price of US$26 a share and down more than 80 per cent from peak levels three summers ago.
Nuvei sustained hits last year, including a critical report from short seller Spruce Point Capital Management, a reduced revenue forecast and the loss of one of its 10 largest customers. The company maintained its lower financial targets when it issued results this month, projecting annual revenue growth of 15 per cent to 20 per cent over the medium term.
Unlike many other tech companies, Nuvei, which manages payments across a range of sectors including retail, travel, online gambling and sports betting, is still growing and profitable. It has added several marquee clients in recent months, including Microsoft Corp., Adobe Inc. and Canadian pharmacy chain Familiprix.
Nuvei’s fourth-quarter revenue reached US$321.5-million, up 46 per cent from the same period a year earlier. Organic growth – revenue expansion from existing businesses excluding acquisitions – was just 7 per cent. Excluding digital assets and cryptocurrencies, organic growth was 17 per cent, in line with the company’s medium-term revenue goals. Net income in the quarter increased by 51 per cent, to $14.1-million.
Adjusted operating earnings, a key measure for analysts, reached US$120.1-million, up 40 per cent year-over-year, representing 37.3 per cent of revenues. Nuvei’s long-term goal is for that margin to reach 50 per cent. Results were roughly in line with expectations reflecting “continued execution” by Nuvei, Mr. Tse said in a report this month.
Sean Silcoff