SCHEDULE: TELUS to Acquire Full Ownership of TELUS Digital for $539M

TELUS Corporation announced a definitive agreement to acquire all outstanding shares of TELUS Digital not already owned for US$4.50 per share, totaling US$539 million.

Summary

• TELUS Corporation will acquire all outstanding multiple voting shares and subordinate voting shares of TELUS Digital not already owned by TELUS for US$4.50 per share.
• The aggregate consideration for these minority shares is US$539 million.
• Shareholders can elect to receive US$4.50 in cash, 0.273 of a TELUS common share, or a combination of US$2.25 cash and 0.136 of a TELUS common share.
• The share consideration is subject to proration, ensuring no more than 25% of the aggregate consideration is paid in TELUS common shares.
• The transaction received unanimous recommendation from TELUS Digital's independent Special Committee and unanimous approval from TELUS Digital's Board of Directors (with interested directors abstaining).
• EQT, TELUS Digital's largest minority shareholder (holding approximately 9.1% of voting rights), and all TELUS Digital's directors and officers (holding approximately 3.2% of subordinate voting shares) have agreed to support the transaction.
• The transaction implies a total equity value for TELUS Digital of approximately US$1.3 billion and a total transaction value (likely enterprise value) of approximately US$2.9 billion.
• TELUS currently owns approximately 86.9% of the outstanding voting power of TELUS Digital.

Sentiment

Score: 8

Explanation: The transaction offers a substantial premium to TELUS Digital's minority shareholders, significantly above its unaffected trading price and initial offer. Strategically, it allows TELUS to fully integrate TELUS Digital's AI and digital experience capabilities, which is seen as a strong positive for future growth and operational efficiency across TELUS's diverse business segments. The unanimous recommendation from the independent Special Committee further reinforces the positive sentiment regarding the fairness of the deal.

Positives

• The US$4.50 per share price represents a 52.0% premium over TELUS Digital's unaffected closing price of US$2.96 on the NYSE on June 11, 2025.
• The offer is a 62.6% premium over the 30-day volume-weighted unaffected average price of TELUS Digital subordinate voting shares on the NYSE prior to June 12, 2025.
• The final offer price of US$4.50 per share is a 32.4% increase from TELUS's initial proposal of US$3.40 per share.
• The price also represents a 16.0% premium over the closing price of TELUS Digital subordinate voting shares on the NYSE on August 29, 2025.
• The acquisition is expected to enable closer operational integration, enhancing AI capabilities and SaaS transformation across TELUS's business lines, including telecommunications, TELUS Health, and TELUS Agriculture & Consumer Goods.
• The transaction is anticipated to accelerate TELUS's global growth in products and services to other customers in key verticals such as financial technology, gaming and technology, communications and media, and health.
• The Special Committee believes the transaction provides immediate and attractive value and liquidity for minority shareholders electing cash, and an opportunity for those electing TELUS shares to participate in future growth and synergies.

Negatives

• Following closing, TELUS Digital subordinate voting shares will be delisted from the NYSE and the Toronto Stock Exchange, and it will cease to be a reporting issuer.
• There can be no assurance that any superior proposal will emerge, especially given TELUS's significant ownership interest (86.9% voting power).
• TELUS has indicated it would not support any refinancing, recapitalization, sale, merger, or other alternative transaction, nor a sale of its TELUS Digital shares.

Risks

• Risks associated with the integration of TELUS Digital into TELUS's business.
• Dependence on key employees and the potential loss of certain key personnel of TELUS Digital.
• Possible failure to realize anticipated strategic, financial, and other benefits of the transaction in the timeframe anticipated or at all.
• Risk of the transaction failing to close or changes in its terms.
• Uncertainty in obtaining requisite shareholder, court, stock exchange, and regulatory approvals in a timely manner or at all.
• Inherent uncertainty associated with financial or other projections.
• Increased indebtedness for TELUS.
• Transitional risks during the integration process.
• Potential undisclosed costs or liabilities associated with the transaction.
• Reliance on information provided by, and assumptions, judgments, and allocations made by TELUS Digital.
• Possibility of litigation relating to the transaction.
• Risks related to the diversion of management's attention from TELUS Digital's ongoing business operations.

Future Outlook

The transaction is expected to enable enhanced AI capabilities and SaaS transformation across TELUS's business lines, including telecommunications, TELUS Health, and TELUS Agriculture & Consumer Goods. It is also anticipated to accelerate global growth in products and services to other customers in key verticals such as financial technology, gaming and technology, communications and media, and health. The completion is expected in the fourth quarter of 2025, subject to approvals.

Management Comments

• "TELUS Digital's world-leading capabilities in digital customer experience solutions and AI innovations are highly complementary to our strategy at TELUS." Darren Entwistle, President and CEO of TELUS.
• "The transaction is fully reflective of our belief that closer operational proximity between TELUS and TELUS Digital will enable enhanced AI capabilities and SaaS transformation across all lines of our business, driving positive outcomes for the customers we serve on a global basis." Darren Entwistle, President and CEO of TELUS.
• "This transaction, once completed, will also accelerate our global growth in products and services to other customers around the world in key verticals, including financial technology, gaming and technology, communications and media, and health, while also delivering significant value for our shareholders." Darren Entwistle, President and CEO of TELUS.
• "The Special Committee of independent directors was careful to safeguard the best interests of TELUS Digital, its minority shareholders, and all affected key stakeholders." Josh Blair, Co-Chair of the Special Committee of TELUS Digital.
• "We believe the transaction provides more immediate and greater value to minority shareholders on a risk-adjusted basis than is expected to be realizable by TELUS Digital as a stand-alone entity in the foreseeable future." Josh Blair, Co-Chair of the Special Committee of TELUS Digital.
• "The transaction provides immediate and attractive value and liquidity for our shareholders who elect to receive cash, and an opportunity for TELUS Digital shareholders who elect to receive TELUS shares to continue participating in the growth of the business, including in synergies expected to be created through the transaction." Olin Anton, Co-Chair of the Special Committee of TELUS Digital.
• "We believe the transaction positions TELUS Digital to enhance its ability to deliver innovative solutions and invest in new capabilities in a highly competitive and increasingly concentrated market environment." Olin Anton, Co-Chair of the Special Committee of TELUS Digital.

Industry Context

This acquisition reflects a broader industry trend towards consolidation and the strategic integration of advanced digital capabilities, particularly in AI and SaaS, within larger telecommunications and diversified technology companies. By fully integrating TELUS Digital, TELUS aims to enhance its competitive position in digital customer experience and AI-driven solutions across its core sectors (telecom, health, agriculture) and expand into new high-growth verticals like fintech and gaming. This move allows TELUS to internalize and leverage TELUS Digital's specialized expertise more closely, a common strategy for companies seeking to accelerate digital transformation and maintain an edge in rapidly evolving technological landscapes.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to global benchmarks.
• The Special Committee's determination that the US$4.50 per share offer provides 'more immediate and greater value to minority shareholders on a risk-adjusted basis than is expected to be realizable by TELUS Digital as a stand-alone entity in the foreseeable future' suggests an internal assessment against a standalone valuation, which is a standard practice in such transactions.
• The premiums offered (52.0% over unaffected closing price, 62.6% over 30-day VWAP) are significant and generally considered attractive in take-private transactions, often exceeding typical premiums observed in the market for similar deals.

Corporate Governance

Legal Proceedings

• The filing identifies 'Possibility of litigation relating to the transaction' as a forward-looking risk.
• Parties are committed to opposing, lifting, or rescinding any injunctions and defending against 'Transaction Litigation' related to the Arrangement.

Related Party Transactions

• TELUS, as the acquirer, is the majority shareholder of TELUS Digital, owning approximately 86.9% of the outstanding voting power.
• EQT, TELUS Digital's largest minority shareholder, has entered into a support and voting agreement to vote in favor of the transaction.
• All of TELUS Digital's directors and officers have also entered into support and voting agreements to vote in favor of the transaction.
• An independent Special Committee of TELUS Digital's Board was formed to evaluate TELUS's proposal and negotiate on behalf of minority shareholders.

Stakeholder Impact

• **Minority Shareholders (TELUS Digital)**: Will receive a significant premium for their shares, providing immediate liquidity and value, with an option to receive cash or TELUS shares.
• **TELUS Shareholders**: Expected to benefit from enhanced strategic capabilities, operational synergies, and accelerated growth across TELUS's diverse business segments.
• **TELUS Digital Employees**: Potential for closer integration into the larger TELUS organization, with implications for roles and strategic direction. The filing notes a risk of dependence on and potential loss of key personnel.
• **Customers**: Expected to benefit from enhanced AI capabilities and SaaS transformation, leading to improved digital customer experiences.
• **Regulatory Bodies**: Will review the transaction for compliance with competition and foreign direct investment laws, as well as securities regulations.

Next Steps

• TELUS Digital will apply for an Interim Order from the British Columbia Supreme Court.
• TELUS Digital will prepare and complete the Company Circular and Schedule 13E-3 in consultation with TELUS.
• The Company Circular and other documents will be filed with applicable Securities Authorities and sent to shareholders.
• TELUS Digital and TELUS will cooperate to respond to any comments received from the SEC regarding the Schedule 13E-3.
• TELUS Digital will convene a Special Meeting of Shareholders on October 27, 2025, to vote on the Arrangement Resolution.
• Following shareholder approval, TELUS Digital will apply for a Final Order from the Court.
• TELUS Digital will suspend its Employee Share Purchase Plan (ESPP) by September 5, 2025, and settle contributions into Subordinate Voting Shares prior to the record date of the Company Meeting.
• The transaction is expected to close in the fourth quarter of 2025, subject to court and regulatory approvals.
• Following closing, TELUS Digital subordinate voting shares will be delisted from the NYSE and TSX, and it will cease to be a reporting issuer.

Key Dates

Recommendation

The acquisition of TELUS Digital by TELUS is a highly strategic move that promises significant long-term benefits for the acquirer. The full integration of TELUS Digital's advanced AI and digital experience capabilities is expected to drive substantial synergies, accelerate growth in key verticals, and enhance TELUS's competitive positioning across its core business segments. While the premium paid for the minority stake is substantial, it is justified by the strategic value and the ability to fully internalize a critical digital asset. The unanimous support from TELUS Digital's independent Special Committee and Board, coupled with the clear strategic rationale, suggests a well-structured deal that should unlock considerable value for TELUS shareholders over time.

Keywords

TELUS, TELUS Digital, Acquisition, Merger, AI, SaaS, Digital Customer Experience, Telecommunications, Health Technology, Agriculture Technology, Corporate Governance, Shareholder Value, Premium, Delisting, SEC Filing, Arrangement Agreement