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Telus acquires LifeWorks Inc. for $2.9-Billion to boost health subsidiary

Telus Corp. TT is acquiring human-resources firm LifeWorks Inc. LWRK-T for $2.9-billion including debt, increasing the scale and global footprint of its health subsidiary.

LifeWorks, which was previously called Morneau Shepell, provides mental-health and employee-wellness services. The Telus deal, announced Thursday, still requires shareholder and regulatory approval, and is expected to close later this year or in the first quarter of 2023.

Combined, Telus Health and LifeWorks would have corporate clients in more than 160 countries, covering more than 50 million lives. (The lives-covered metric includes employees’ family members.)

Daniel Martz, vice-president of virtual care at Telus Health, said demand for employee-wellness services is growing, as employers look to retain talent and reduce absenteeism.

“Access to care is a big challenge, and mental health is a growing theme across the world,” Mr. Martz said in an interview Thursday. “Employees are increasingly expecting to receive broader health and wellness and work-life support in this environment.”

Telus is offering $33 a share of LifeWorks, amounting to $2.3-billion, and would also take on roughly $600-million of debt. Shareholders of LifeWorks will have the option of being paid in cash or in Telus shares.

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Telus entered the health business in 2008 when it acquired Emergis Inc., a Montreal-based electronic medical-records business previously owned by BCE Inc., for $763-million. Telus chief executive officer Darren Entwistle became interested in the sector after his father, who was battling leukemia, died in a Montreal hospital bed after he was accidentally given penicillin, which he was allergic to.

The Telus Health division has since expanded into other services, including virtual care, electronic medical records, health benefits management, home health monitoring and e-prescribing.

The division has become a differentiator for Vancouver-based Telus, which owns two other high-growth technology businesses: Telus International, an IT services division it took public on the Toronto Stock Exchange and the New York Stock Exchange last year; and its agricultural-technology unit, Telus Agriculture.

Mr. Entwistle has said he plans to follow the Telus International blueprint in order to expand Telus Health, Telus Agriculture and Telus’ security business. An initial public offering would provide Telus Health with currency for making future acquisitions.

The takeover of LifeWorks requires approvals from the court, LifeWorks’ shareholders and regulators. Mr. Martz declined to provide details on the regulatory process. However, the company told analysts during a conference call on Thursday that owing to a lack of overlap between Telus Health and LifeWorks, the regulatory process should be “smooth sailing.”

The deal also requires the approval of more than 66 per cent of the votes cast by LifeWorks shareholders at a special meeting. That meeting is expected to take place by Aug. 5.

Desjardins analyst Jérome Dubreuil said the takeover is likely to succeed as the regulatory risk appears to be low.

“The deal could also significantly increase Telus Health’s scale and make the unit mostly self-sufficient in terms of funding new initiatives,” Mr. Dubreuil wrote in a research note, adding that the takeover “also provides Telus with an opportunity to expand internationally ( LifeWorks generated 42 per cent of its revenue outside of Canada in FY21) much faster.”

Royal Bank of Canada analyst Drew McReynolds said the deal would increase Telus Health’s revenues from about $500-million to approximately $1.6-billion.

Telus shares declined by nearly 6 per cent on the Toronto Stock Exchange on Thursday, closing at $27.62. Shares of LifeWorks soared more than 66 per cent, or $12.08, closing at $30.28.

With a report from The Canadian Press

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