Telus strikes $2.9B deal for Lifeworks in push into digital health

Telus Corp. has signed a deal to buy Lifeworks Inc. valued at $2.9 billion including debt as it pushes further into employee wellness and health-care services.

Lifeworks, formerly known as Morneau Shepell, is a HR firm that helps companies with staff and family assistance plans, absence management, pension and benefits administration and retirement planning.

The transaction will add LifeWorks' employee and family assistance program and benefit administration capabilities to Telus Health's digital technologies. Telus Health offers virtual care and provides patients access to digital pharmacy options, home health monitoring and electronic health records.

“This transaction is financially compelling and strategically attractive to Telus, and a natural complement to Telus Health,” Telus CFO Doug French said in a statement Thursday.

The move comes as digital health and virtual care services saw great success during the pandemic amid lockdowns.

Under the agreement, LifeWorks shareholders will have the option to receive $33 in cash or 1.0642 Telus shares for each Lifeworks share, subject to pro-ration. The amount of cash and number of shares will be limited so that Telus will pay for half the deal in cash and half in shares.

Scotiabank analyst Jeffrey Fan sees the transaction strengthening Telus's place in the digital health industry.

“This acquisition ... opens the potential for more growth and tuck-ins internationally,” he said in a note to clients.

Desjardins analyst Jerome Dubreuil also views the proposed acquisition as a positive for Telus. “The deal could also significantly increase Telus Health's scale and make the unit mostly self-sufficient in terms of funding new initiatives,” he said in a note to clients.

Telus expects the deal to help generate annual savings from $170 million to $200 million over the next three to five years.

However, some money managers aren't totally excited about it in this market climate. “The premium (Telus) is paying in a market that is only going one way is not a good look,” said Baskin Wealth Management's chief investment officer Barry Schwartz.

The deal requires support by a two-thirds majority vote by Lifeworks shareholders as well as court and other regulatory approvals.