The names of several potential buyers for Lightspeed are circulating as the Montreal-based provider of technology solutions for merchants announced Wednesday evening that it is conducting a strategic review of its activities “with a view to realizing its full potential.”
Lightspeed management says it has engaged in discussions about a “range of potential strategic alternatives” and “may continue to engage in such discussions.”
The list of potential suitors is long and could include both competitors and private investment firms.
A name like Clover Networks – a company owned by the giant Fiserv with a market capitalization of over US$100 billion – is one to consider, according to analyst Richard Tse of National Bank Financial.
Other major U.S.-listed companies that may be interested include Global Payments, Intuit, NCR Voyix, Toast and Shift4, according to Tse.
“Given that Lightspeed has recently focused on profitability with a more disciplined approach to capital allocation, potential interest from private investors should not be ruled out,” the expert said in a note sent to clients late Wednesday.
Richard Tse says it’s not unreasonable to think Lightspeed could be worth as much as Nuvei, another Montreal fintech company that accepted a buyout offer earlier this year from Advent International, a Boston-based private equity firm.
Lightspeed’s management was forced to react Wednesday evening after its stock jumped 13% during the day following news that the company had hired U.S. bank JP Morgan to help it examine strategic alternatives, including a sale of the business.
Citing people familiar with the matter, Reuters said that JP Morgan experts were expected to solicit interest from potential buyers and that discussions were only just beginning.
The current stock price gives Lightspeed a market value of CAD 3.2 billion.
Factoring in Nuvei’s valuation multiple, Tse calculates a potential takeover price for Lightspeed of 18% to 36% above Wednesday’s closing price, or a price in the rough range of $25 to $29 per share.
Lightspeed shares closed at $21.15 on Wednesday in Toronto.
The confirmation of a strategic review by Lightspeed management does not come as a complete surprise.
Lightspeed founder and CEO Dax Dasilva told La Presse in March that the purchase offer accepted this year by Longueuil company mdf commerce and the strategic review conducted by Nuvei did not leave him “indifferent.”
“It’s interesting. It makes you think. When you look at what’s happening, you wonder if closing the capital would be a better solution. We’re always open to these discussions,” Dax Dasilva said in an interview.
Richard Tse believes it will be difficult for Lightspeed to grow its number of locations (merchants) once it has finished converting its current merchant-customers to its payment solution. “Lightspeed’s narrowing target market to ‘complex’ merchants makes Lightspeed’s task potentially more difficult,” the analyst notes.
Lightspeed continues its transition by targeting SMBs with at least 10 employees generating gross transaction volume greater than $200,000 per year, with a preference for those with gross transaction volume greater than $500,000 per year.
Dax Dasilva returned to Lightspeed as CEO earlier this year after replacing his friend JP Chauvet in mid-February.
After initially listing at $16 five years ago, Lightspeed’s stock appreciated to $165 before falling back to its current level.
The Caisse de dépôt et placement du Québec is Lightspeed’s largest shareholder with a 16% stake.
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- 16%
- Participation of the Caisse de dépôt in the share capital of Lightspeed