TELUS Finalizes Agreement to Acquire TELUS Digital

TELUS Corporation (TSX: T, NYSE: TU) and TELUS International (Cda) Inc. (NYSE & TSX: TIXT) announced a definitive agreement for TELUS to acquire all outstanding multiple voting shares and subordinate voting shares of TELUS Digital not currently owned by TELUS. The transaction is valued at US$4.50 per share, reflecting an aggregate consideration of US$539 million for the remaining equity. This agreement follows extensive negotiations that commenced with an initial non-binding indication of interest from TELUS on June 11, 2025. The independent Special Committee of TELUS Digital's board of directors, alongside the full Board (with interested directors abstaining), has unanimously recommended that shareholders vote in favor of the Arrangement.

Premium Valuation for TELUS Digital Shareholders

The agreed-upon price of US$4.50 per share offers a significant premium to TELUS Digital's minority shareholders. This represents a 52.0% premium over the unaffected closing price of US$2.96 per subordinate voting share on the New York Stock Exchange (NYSE) on June 11, 2025, the trading day prior to TELUS's initial proposal. Furthermore, the offer marks 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, and a 16.0% premium over the closing price on August 29, 2025. The current offer also constitutes a 32.4% increase from TELUS's initial proposal of US$3.40 per share.

Shareholders of TELUS Digital will have several consideration options: receiving US$4.50 in cash, 0.273 of a TELUS common share, or a combination of US$2.25 in cash and 0.136 of a TELUS common share. Shareholder elections for options involving TELUS common shares will be subject to proration, ensuring that the aggregate consideration includes no more than 25% in TELUS common shares.

Strategic Alignment and Growth Drivers

TELUS Corporation's acquisition of TELUS Digital is a strategic move designed to bolster its Artificial Intelligence (AI) and Software-as-a-Service (SaaS) capabilities across its diverse business lines. Darren Entwistle, President and CEO of TELUS, emphasized the rationale:

"Closer operational proximity between TELUS and TELUS Digital will enable enhanced AI capabilities and SaaS transformation across all lines of our business, including telecommunications, TELUS Health and TELUS Agriculture & Consumer Goods, driving positive outcomes for the customers we serve on a global basis."

This integration is expected to accelerate TELUS's global growth in key verticals, including financial technology, gaming and technology, communications and media, and health. The move is intended to leverage TELUS Digital's expertise in digital customer experience solutions and AI innovations to drive operational synergies and long-term value creation.

TELUS Digital's Financial Performance and Valuation Context

While the acquisition price reflects a significant premium, TELUS Digital's recent financial performance has presented challenges. In the second quarter of 2025, the company reported a net loss of $272 million, primarily attributed to a $224 million non-cash goodwill impairment charge. Despite this, TELUS Digital recorded a 7% year-over-year revenue growth, reaching $699 million in Q2 2025. Adjusted EBITDA, however, saw a 38% decline year-over-year, settling at $94 million for the same period. The trailing twelve-month revenue stood at $2.72 billion, with a net loss margin expanding to 21.7% in the first half of 2025 from a 1.9% profit margin in the prior-year period. As of September 2, 2025, TELUS Digital had a market capitalization of $1.25 billion. The acquisition price, despite these recent losses, underscores TELUS Corporation's confidence in TELUS Digital's AI and SaaS capabilities and its long-term strategic value rather than its current earnings trajectory.

Path to Transaction Completion and Future Outlook

The transaction is subject to shareholder approval at a Special Meeting scheduled for October 27, 2025. For approval, the Arrangement requires at least two-thirds (66⅔%) of votes cast by holders of subordinate voting shares and multiple voting shares (voting together as a single class) and a simple majority of votes cast by holders of subordinate voting shares (excluding TELUS and its affiliates). EQT, TELUS Digital's largest minority shareholder, holding approximately 37.7% of the outstanding subordinate voting shares post-conversion, has agreed to vote in favor of the transaction. The record date for shareholders entitled to vote was September 12, 2025, with the proxy voting deadline set for October 23, 2025. Subject to court approval, regulatory approvals, and other customary closing conditions, the acquisition is anticipated to close in the fourth quarter of 2025. Following the completion of the transaction, TELUS Digital subordinate voting shares are expected to be delisted from the NYSE and the Toronto Stock Exchange (TSX), ceasing to be a reporting issuer in Canada. This integration is expected to position TELUS to further enhance its competitive standing and market share in the rapidly evolving digital services landscape.