Nuvei (TSX: NVEI) stock saw its share price surge by 31.82% between March 15 and March 18. The rapid rise in its shares came after news came out that the company might be going private through a buyout deal.
The $5.48 billion market capitalization point-of-sale and payment processing company headquartered in Montreal did not say it is finalizing a deal yet. Rather, it let the world know that it is fielding an offer from a private equity firm and is open to fielding offers.
While current and prospective investors await an announcement about a deal, what should they think about this development? Today, we will discuss what is happening surrounding the potential buyout deal and whether it might make sense to invest in its shares before it happens.
The announcement
On Saturday, March 16, a Wall Street Journal report mentioned that Advent International, a Boston-based private equity firm, is in advanced talks with Nuvei regarding a buyout.
On Saturday, March 18, Globe and Mail reporter Sean Silcoff wrote that Nuvei “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.” Todd Coupland, a top analyst from CIBC, believes that the deal could happen quite soon.
Nuvei stock responded to the reports to confirm the rumours. However, the company also said it is in talks to ensure that holders of multiple voting shares retain ownership. Despite being in advanced talks, the company clarified that it is not close to entering an agreement yet.
The clarification means that the current deal that Nuvei is entertaining might fall apart, but the POS company is open to fielding more offers if this deal does not go through.
When can we expect a deal to be made?
With the rumours confirmed, an announcement on whether there is a successful deal with Advent International might come soon. The firm has appointed a special committee to evaluate the “expressions of interest” to identify whether the deal might be suitable for the company.
Coupland believes that the market still undervalues the POS firm compared to its peers. He noted that the chief executive officer of Nuvei, Philip Fayer, has discussed the possibility of a buyout over the last two years.
Foolish takeaway
After such a positive response that saw its share prices surge significantly, Nuvei might feel tempted to continue advanced talks and entertain more offers. It is important to note that despite the recent uptick, Nuvei stock trades at a 33.92% discount from its 52-week high valuation.
The drop in its valuation can be partially attributed to macroeconomic jitters. However, a short-seller report by Spruce Point Capital Management regarding Nuvei’s “questionable” US$1.3 billion acquisition of Paya Holdings in 2023 also contributed to the downturn in its share prices.
The company itself has recently entered a strategic partnership with Adobe for payment technology access. This follows a similar deal with Microsoft last year. With the development still new, investors might want to keep a close eye on analyst opinions regarding whether it might be a good buy in light of the buyout situation.
