The Canada Pension Plan Investment Board's Toronto offices. The Caisse de dépôt et placement du Québec and the CPPIB have taken part in a US$650-million equity funding round for FNZ Group.Chris Young/The Canadian Press
Two major Canadian pension funds have taken part in a US$650-million equity funding round for FNZ Group, boosting their investments in the New Zealand-based software provider, which is fighting a lawsuit over the allegedly unfair dilution of minority shareholders.
FNZ announced Wednesday that it raised the new money from existing shareholders such as the Caisse de dépôt et placement du Québec, the Canada Pension Plan Investment Board, Generation Investment Management and Motive Partners.
Several of FNZ’s clients, including Scottish investment company Aberdeen Group PLC and British insurer Aviva PLC, also took part in the funding round, which is intended to support FNZ’s credit ratings and fund its operations.
Earlier this year, a cohort of minority shareholders filed a lawsuit in a New Zealand court alleging that FNZ and some of its largest shareholders, including the Caisse and CPPIB, had unfairly diluted their ownership stakes through a series of previous capital raises totalling US$1.5-billion.
Pension fund CEOs renew calls for Ottawa to sell key infrastructure assets
OMERS review recommends rework of two-tiered governance structure
Some of that funding was raised through preference shares that gave institutional shareholders a preferred rate of return and paid special dividends. About 200 owners of FNZ’s common shares, including current and former employees, alleged that the preference shares were issued on unfair terms to allow larger investors to maximize returns.
FNZ declined to provide details of the terms of the new, US$650-million equity funding round and did not provide an updated valuation for the company. The company has previously said it considers the lawsuit “to be entirely without merit.”
After months of legal wrangling, a group of employee shareholders announced last week that they have added an additional plaintiff in a new filing with the New Zealand court. One of the original plaintiffs, private equity firm Summit Partners, withdrew from the complaint after it was filed.
None of the allegations have been proven in court, but three separate attempts to have the case stayed by the High Court of New Zealand have failed, according to the employee shareholder group.
“Our successful addition of a third plaintiff ensures that this will indeed come before a court,” the group said in a statement last week.
FNZ provides a digital wealth-management platform to banks and insurers around the world and counts Bank of Montreal among its clients. The software provider has grown rapidly, expanding into North America, Europe and Asia, and now has US$2.1-trillion of assets on its platform.
The Caisse, which invests $496-billion on behalf of dozens of pension and insurance funds, is FNZ’s largest single shareholder and invested early in the company in 2018.
“FNZ is a fast-growing company, and we remain confident in its long-term business model,” Caisse spokesperson Marjaurie Côté-Boileau said in an e-mailed statement. “This confidence is shared by other leading institutional investors who have reaffirmed their support through renewed investments in the company.”
The CPPIB, which manages $732-billion for 22 million working and retired Canadians, invested US$1.1-billion in FNZ in 2022, when the company was near its peak valuation.
A CPPIB spokesperson declined to comment.
Since then, FNZ has overhauled its executive team, installing Blythe Masters – an “industry partner” at Motive Partners, which has a seat on FNZ’s board – as its CEO.
“The opportunity ahead is huge and this capital allows us to grasp it with both hands,” Ms. Masters said in a statement.
Last year, FNZ had pre-tax losses of US$688-million. But Ms. Masters told Bloomberg News in an interview that the company is aiming to generate positive free cash flow by the second half of 2027.
She added that all of FNZ’s existing institutional shareholders participated in the latest fundraising round in proportion to their respective ownership stakes.