Major Canadian tech financings continue as Nuvei raises $358-million in common equity

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One of Canada’s largest private digital companies, payments technology provider Nuvei Corp., has raised $358-million in common equity from existing investors Caisse de dépôt et placement du Québec and private equity firm Novacap.

The financing gives the Montreal company a $2.65-billion enterprise value and marks the latest in a surge of privately funded Canadian technology megadeals this year.

The financing caps a big year for Nuvei, previously known as Pivotal Payments. In August, it bought London Stock Exchange-listed payments services provider SafeCharge International Group Ltd. for US$889-million, leaving it with a capital structure that included US$844-million in debt and US$280-million in convertible debentures and preferred shares from the Caisse, Novacap and management.

That acquisition doubled the size of Nuvei, which generated US$150-million in revenue and US$61-million in operating earnings in 2018, compared with SafeCharge’s US$138.5-million and US$37.3-million, respectively. The combined company is on schedule to generate more than US$100-million in pro-forma operating earnings and US$300-million-plus in revenue this year.

Credit rating agency Standard & Poor’s forecasts a low-teen percentage revenue increase and higher operating earnings expansion for the company in the coming year because of cost-saving synergies. “We believe that the acquisition strengthens the company’s business model and adds scale that is critical for future sustainable growth,” S&P said in June.

This week’s financing deal comes near the end of a record year for venture-capital deals in the Canadian tech sector. Eleven other companies have attracted $100-million-plus each in private capital this year, including back-to-back record deals in September by B.C.-based legal software firm Themis Solutions Inc. (operating as Clio) and St. John’s, NL-based Verafin Inc., a fraud-detection and anti-money-laundering software provider.

Five of the financings this year surpassed $200-million, a level only four Canadian companies had previously reached, according to market research firm Refinitiv. The Nuvei deal is believed to be the largest ever direct investment into a tech company as the Clio and Verafin deals largely saw early investors sell out.

Novacap partner David Lewin said the latest financing gives Nuvei flexibility to either invest in its business, pay down debt or buy rivals in the consolidating payments sector and weather “any ups and downs in the economy with a strong balance sheet. It creates optionality … and to us, optionality is linked to value creation.”

Despite Canada’s rising global reputation as a hotbed of promising technology firms, Nuvei has kept a surprisingly low profile given its size and global reach. It handles US$34-billion annually in credit- and debit-card transactions for 55,000 customers. It is a big player in both point-of-sale payments services for retailers and restaurants in North America and online payments for large-scale e-commerce merchants globally.

Nuvei has 800 employees in 14 offices and a management team made up mostly of seasoned outside recruits spread between Canada, the United States and Israel. As examples, president Mark Pyke, based in Louisville, Ky., was previously president of NYSE-listed TSYS, while CFO David Schwartz joined a year ago from shoe retail giant Aldo Group.

Early investor Goldman Sachs sold the last of its stake in 2017, when Caisse and Novacap bought a majority position in Nuvei, valuing it then at $525-million.

Nuvei represents one of the Caisse’s biggest investments in a domestic tech company since it increased its support for the Canadian sector earlier this decade, and the largest for Novacap in its 38-year history. “[We] are proud to have sustained Nuvei’s growth … and to have supported the emergence of a world-class global player in its field," said Charles Émond, executive vice-president, Quebec, with the Caisse.

Nuvei was founded in 2003 by CEO Philip Fayer, now 42, after he had to shut down his first company, Paysystems Corp., a billing aggregator for thousands of internet merchants. The closing of Paysystems was because of regulatory changes, he told The Globe and Mail in 2010.

But the Montreal native, who had attended military school, piloted planes and even raced in a Molson Indy event in his 20s, was determined to build another payments business “I’m someone who never looks back,” he told the Les Affaires business newspaper in 2010.