Nuvei shareholders should take the deal, says National

National Bank Financials Markets analyst Richard Tse thinks the deal to take Nuvei (Nuvei Stock Quote, Chart, News, Analysts, Financials TSX:NVEI) private is a fair one for shareholders.

On April 1, NVEI announced that it had signed a deal to be taken private by private equity firm Advent International. The deal, which values the company at (US) $6.3-billion, was approved unanimously by its board.

“This transaction marks the beginning of an exciting new chapter for Nuvei, and we are glad to partner with Advent to continue to deliver for our customers and employees, and capitalize on the significant opportunities that this investment provides,” CEO Philip Fayer said. “Our strategic initiatives have always focused on accelerating our customers revenue, driving innovation across our technology, and developing our people. Bringing in a partner with such extensive experience in the payments sector will continue to support our development.”

Tse explained the reasoning behind his move today to change his rating on the stock from “Outperform” to “Tender” and change his price target from (US) $30.00 to $34.00.

“Nuvei announced this afternoon that it has entered into a definitive agreement to be acquired by private equity firm Advent International with existing shareholders Philip Fayer (CEO), Novacap and CDPQ who plan to rollover (part of) their existing positions into the private entity for US$34.00 per share or approximately US$6.3 bln in total equity value,” he wrote. “We believe the transaction appears reasonably valued based on precedent transactions and relative to comps. We believe the potential for a competitive bid is low given a non-solicitation covenant on the part of Nuvei and a meaningful “break fee” of $150 mln.

The analyst said the all-cash deal make sense when the numbers are broken down.

“Bottom line, we believe the transaction represents fair value as noted above under the assumption that Nuvei was expected to grow in the mid-teens this fiscal year with mid-to-high-30s EBITDA margins. We expect the deal to close on schedule (i.e., late 2024 / Q1 of 2025) given: (1) unanimous approval by the multiple voting shareholders; (2) a premium valuation to its closest peers (12.0x vs peer average 11.0x); and (3) sizeable break fee (US$150 mln) coupled with a non-solicitation clause,” he concluded.