SCHEDULE 13D/A: TELUS Corporation Proposes US$2.3 Billion Acquisition of TELUS International at Premium

TELUS Corporation has submitted a non-binding proposal to acquire all outstanding shares of its subsidiary, TELUS International (Cda) Inc., that it does not already own for US$3.40 per share in cash, valuing the company at approximately US$2.3 billion.

Summary

• TELUS Corporation (TELUS) has submitted a non-binding proposal to acquire 100% of the outstanding multiple voting shares and subordinate voting shares of TELUS International (Cda) Inc. (TELUS Digital) that it does not currently own.
• The proposed purchase price is US$3.40 per Share, payable in cash, TELUS common shares, or a combination of both.
• This offer represents a premium of approximately 15% to TELUS Digital's closing share price on the New York Stock Exchange on June 11, 2025, and approximately 23% over the 30-day volume-weighted average price (VWAP) as of the same date.
• The proposal values TELUS Digital at an enterprise value of approximately US$2.3 billion on a fully diluted basis (excluding lease liabilities).
• TELUS currently holds 158,878,841 shares of TELUS Digital, representing 60.1% of the outstanding Subordinate Voting Shares (assuming conversion of Multiple Voting Shares) and 86.9% of the combined voting power.
• The transaction is anticipated to be completed through a Court-approved plan of arrangement under the British Columbia Business Corporations Act.
• TELUS intends to fund any cash consideration using a combination of cash on its balance sheet and debt financing, with no financing condition for the Arrangement Agreement.
• The proposal is subject to confirmatory due diligence, negotiation of definitive agreements, and various approvals, including the formation of a special committee of independent directors by TELUS Digital's Board.

Sentiment

Score: 8

Explanation: The sentiment is highly positive for TELUS International shareholders due to the significant premium offered and the potential for liquidity. For TELUS Corporation, it represents a strategic consolidation, which is generally viewed positively if the integration is successful and synergies are realized.

Positives

• The proposed acquisition offers a significant premium of approximately 15% to the closing share price and 23% to the 30-day VWAP, providing compelling value and liquidity to TELUS Digital shareholders.
• TELUS Corporation, as the principal shareholder and largest customer, has deep familiarity with TELUS Digital, which is expected to expedite due diligence and integration.
• The transaction is proposed to be all-cash or a combination of cash and shares, offering flexibility and immediate liquidity to shareholders.
• TELUS Corporation has ample liquidity and access to financing, indicating strong financial capacity to complete the transaction without a financing condition.

Negatives

• The proposal is non-binding and does not impose any obligation or liability on TELUS to complete the transaction, meaning there is no guarantee it will proceed.
• TELUS has stated this is the only transaction it is prepared to consider for TELUS Digital and would not support alternative forms of transactions or a sale of its own shares, potentially limiting other strategic options for TELUS Digital.
• The consummation of the Proposed Acquisition is subject to a number of conditions, including confirmatory due diligence, agreement on transaction structure, negotiation of mutually acceptable definitive transaction documents, and formal approval by the Board, introducing uncertainty.

Risks

• The non-binding nature of the proposal means there is no assurance that definitive transaction documents will be entered into, or that a transaction will be consummated.
• The transaction is subject to customary closing conditions, including shareholder approvals required under applicable securities laws and court approval, which could delay or prevent completion.
• The Proposed Acquisition may result in significant changes for TELUS Digital, including potential delisting from the New York Stock Exchange and termination of registration, which could impact liquidity for remaining shareholders if the transaction does not acquire 100% of shares.
• The transaction is subject to Multilateral Instrument 61-101 in Canada and Rule 13E-3 in the U.S., requiring specific actions like forming a special committee, which adds procedural complexity.

Future Outlook

The document outlines TELUS Corporation's intent to acquire TELUS International, with an expectation to complete confirmatory due diligence and proceed towards signing an Arrangement Agreement expeditiously. The proposed acquisition, if successful, would lead to TELUS International becoming a wholly-owned subsidiary of TELUS Corporation, potentially resulting in its delisting from the NYSE and termination of registration.

Management Comments

• Darren Entwistle, President and CEO of TELUS Corporation, stated, 'TELUS has a long history with TELUS Digital dating back to 2005, and we are currently TELUS Digital's largest customer.'
• Mr. Entwistle also commented, 'Given our relationship, we are deeply familiar with TELUS Digital and believe we are best positioned to acquire and integrate the Company and help it to achieve its full potential.'
• TELUS management has concluded that 'this is the only transaction that TELUS is prepared to consider for the Company and we would not support any refinancing, recapitalization, sale, merger or other alternative form of transaction, nor a sale of our Shares.'

Industry Context

This proposed acquisition reflects a strategic move by a parent company to fully integrate a publicly traded subsidiary, common in the digital solutions and customer experience industry where consolidation can enhance operational synergies and market positioning. TELUS Digital operates in the digital journey solutions space, providing services to clients, and its full integration into TELUS Corporation could streamline service offerings and client engagement.

Corporate Governance

Related Party Transactions

• The proposed acquisition is a related-party transaction, as TELUS Corporation is the principal shareholder (holding 60.1% of Subordinate Voting Shares and 86.9% of combined voting power) and largest customer of TELUS International (Cda) Inc.

Stakeholder Impact

• Shareholders of TELUS Digital: Potential for liquidity and a significant premium on their shares if the transaction is completed.
• Employees of TELUS Digital: Potential for integration into TELUS Corporation, with discussions on a post-closing integration plan already anticipated.
• Creditors of TELUS Digital: Existing debt of the Company is expected to remain outstanding on its existing terms, with the transaction not constituting a change of control event.
• TELUS Corporation Shareholders: Potential for strategic consolidation and synergies from fully integrating TELUS Digital, funded by cash and debt.

Next Steps

• TELUS Digital's Board of Directors is requested to immediately undertake required actions, including forming a special committee comprised of independent directors.
• TELUS Corporation will promptly provide a draft Arrangement Agreement for consideration.
• TELUS Corporation anticipates completing confirmatory due diligence within the timeframe required to negotiate the Arrangement Agreement.
• TELUS Corporation expects feedback from TELUS Digital by no later than June 18, 2025.
• If definitive transaction documents are entered into, the consummation of the acquisition would be subject to customary closing conditions, including shareholder approvals and court approval.

Key Dates

Recommendation

Keywords

TELUS Corporation, TELUS International, Acquisition, Non-binding proposal, Share purchase, Merger, SEC filing, Schedule 13D/A, Premium offer, Enterprise value, Corporate governance, Shareholder liquidity