Telus Corp. signed an agreement to purchase LifeWorks Inc. worth $2.9 billion including debt as the company pushes further into employee wellness and wellness services.
LifeWorks, formerly known as Morneau Shepell, is a staffing company that helps companies with employee and family support planning, absence management, pension and benefits management and retirement planning .
This transaction will add LifeWorks employee and family assistance program and benefits management capabilities to Telus Health’s digital technologies.
Telus Health provides virtual care and provides patients with access to digital pharmacy options, home health monitoring, and electronic health records.
“This transaction is financially and strategically attractive to Telus and is a natural addition to Telus Health,” Telus Chief Financial Officer Doug French said in a statement on Thursday.
The move comes as digital virtual and healthcare services have enjoyed huge success during the COVID-19 pandemic amid shutdowns and concerns about the spread of the virus.
Under the agreement, LifeWorks shareholders will have the option of receiving $33 in cash or 1,0642 Telus shares for each LifeWorks share, depending on the ratio.
The amount of cash and the number of shares will be limited so that Telus will pay for half of the deal in cash and half in shares.
Scotiabank analyst Jeffrey Fan sees the transaction as strengthening Telus’ position in the digital health industry.
“This acquisition will position the company not only as an important force in the corporate benefits and EAP (employee assistance program) space in Canada, but will also open up the potential for more growth and attract more customers.” international visitors,” he said in a note. client.
Desjardins analyst Jerome Dubreuil also sees the proposed acquisition as a positive for Telus.
“This deal could also significantly increase the size of Telus Health and make it largely self-sufficient in funding new initiatives,” he said in a note to clients.
Telus hopes the transaction will help generate annual savings of between $170 million and $200 million over the next three to five years.
The combined companies have corporate clients across Canada, the United States, and more than 160 countries with more than 50 million people globally.
While analysts are generally positive about the deal, some money managers aren’t quite as enthusiastic about it in this market environment.
“The premium (Telus) being paid in a one-way market is not a good look,” said Barry Schwartz, chief investment officer at Baskin Wealth Management.
The deal requires a two-thirds majority support by LifeWorks shareholders as well as court and other regulatory approval.
The companies hope to close the deal in the fourth quarter of 2022.
Telus said in a conference call with analysts that it does not anticipate much overlap in services between the two organizations in Canada and internationally, and expects the regulatory process to “go smoothly.”
LifeWorks stock closed at $18.20 on the Toronto Stock Exchange on Wednesday. Shares of Telus closed at $29.36.
News of the deal sent LifeWorks stock up nearly 69% in early Thursday trading.
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