Telus Announces Agreement to Acquire Lifeworks

Acquisition significantly accelerates TELUS Health’s vision of employer-based healthcare, increasing access to high quality, proactive healthcare and mental wellness for employees by unifying digital-first solutions across the care continuum

Adds LifeWorks’ leading employee and family assistance program (“EFAP”) and benefits administration capabilities to TELUS Health’s existing suite of leading digital health technologies, providing virtual care and in-person care, support for mental health, virtual pharmacy, home health monitoring, electronic medical and collaborative health records, benefits and pharmacy management solutions, and personal emergency response services

Shared values and beliefs between TELUS Health and LifeWorks will facilitate collaboration required to rapidly deploy next-gen employer digital primary and preventative health and wellness capabilities for the benefit of employees around the world

Combined organization has thousands of leading corporate clients across Canada, the U.S. and in over 160 countries covering more than 50 million lives worldwide, enabling an unparalleled digital health and wellness experience for customers, employers and employees

Synergies with TELUS International to leverage extensive client base and significant expertise in client service to grow enhanced TELUS Health product offerings to clients internationally

Acquisition adds significant scale to TELUS Health, with combined annual revenue of approximately $1.6 billion1, underpinning continued strong growth and profitability

TELUS Corporation announced that it has entered into a definitive agreement with LifeWorks, Inc. pursuant to which TELUS will acquire all of the issued and outstanding common shares of LifeWorks for $33.00 per LifeWorks common share, representing total offer consideration of approximately $2.3 billion, and the assumption of net debt of approximately $600 million, subject to required court, LifeWorks shareholder, stock exchange and regulatory approvals  All currency values in this news release are in Canadian dollars unless otherwise noted.

“We look forward to welcoming LifeWorks employees and customers into our TELUS Health family,” said Darren Entwistle, President and CEO of TELUS. announcement will enable us to combine the respective skills and capabilities of LifeWorks and TELUS Health, creating a globally leading, end-to-end, digital-first employee preventative and mental health and wellness platform covering more than 50 million lives. Customers will benefit from our team’s steadfast focus on providing exceptional customer experiences over our world-leading broadband networks, our consolidated engineering talent that will incorporate best-in-class data platform technologies to positively impact health outcomes for employees and their families, and our significantly expanded economies of scope and scale. This includes complementing LifeWorks’ international relationships with TELUS International’s proven expertise in digital transformation and client service excellence, as well as their expansive client base and delivery teams spanning 28 countries, to extend our offerings to customers well beyond Canada. Indeed, at TELUS Health, our mission is predicated on the belief that we can build a healthier future for people around the world by leveraging the power of technology, in combination with our caring culture, to promote collaboration and efficiency, and create better health experiences across the entire health ecosystem. This is particularly crucial in the post-pandemic era, where employers and their employees are struggling with mental health and well-being concerns. In this regard, our combined organizations, guided by a shared set of values, will provide employers with simple, convenient and effective, data-driven primary and preventive care solutions for employees and their families to proactively manage their health and wellness, including their mental health, so that they can lead their healthiest and most productive professional and personal lives.”

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Stephen Liptrap, President and CEO of LifeWorks, stated, “The Transaction represents an exciting new chapter for LifeWorks. The combination of TELUS Health and LifeWorks represents an unmatched opportunity to create a leader in employer-focused primary and preventative digital healthcare and mental wellness solutions on a global basis. Together, we will accelerate our shared vision of empowering individuals to live their healthiest lives by unifying the continuum of care through digital-first innovations, as well as our unmatched in-person care. Our two organizations also have shared values and are leading, purpose-driven organizations committed to improving the lives of people around the world. The fit for the LifeWorks team couldn’t be better.”

Doug French, Executive Vice-president and CFO of TELUS said, “This transaction is financially compelling and strategically attractive to TELUS, and a natural complement to TELUS Health, significantly accelerating our vision of advancing employer-based healthcare, increasing access to high quality, proactive healthcare and mental wellness for employees. We have identified readily achievable synergies and anticipate being able to drive significant cross-selling opportunities between our respective organizations, including TELUS International in particular, while driving better health outcomes for the employees and families that we serve around the world. These cross-selling synergies, alongside those related to operating costs, are expected to accelerate once we complete the integration, reaching an annual run rate in excess of $170 million over the next three to five year period, enhancing EBITDA and free cash flow growth. We will assess the impact to our annual guidance after the closing of this transaction. In 2021, LifeWorks reported consolidated revenue and adjusted EBITDA of over $1 billion and $195 million, respectively, approximating nearly 6 per cent of TELUS’ consolidated revenue, and 3 per cent of adjusted EBITDA2, reported in 2021. Pro forma leverage is not anticipated to increase materially given LifeWorks robust cash flow generation, and our leading dividend growth program, which was recently extended through 2025 targeting annual growth of 7 to 10 per cent, remains unaffected.”

The purchase price will be funded with a combination of cash and TELUS common shares, subject to pro-ration such that the aggregate consideration will be paid 50 per cent in cash and 50 per cent in TELUS common shares. The offer price of $33.00 per LifeWorks common share implies a premium of 89 per cent to the volume weighted average price of the common shares of LifeWorks for the 20 trading days ending June 14, 2022.

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Transaction Rationale

There has been an unprecedented shift in what is needed to support employers in addressing the evolving health and wellness needs of employees and their families, including a greater focus on supporting mental health. The traditional EFAP industry faces increasing pressure to keep up with the rapid pace of change, while seeing increased competition from upstarts that offer scalable, digital-first solutions available wherever an employee may be working, that are able to address the realities facing the modern workforce. LifeWorks has long-standing EFAP market expertise, which includes its unmatched high-touch and in-person solution, as well as its 15-year investment in and focus on its leading digital capabilities and platform, and extensive administrative, retirement and financial solutions. Our strong belief is that these capabilities, in combination with TELUS Health’s track record of developing rich, digitally-native primary, preventative mental health solutions for individuals, patients and practitioners, as well as our exciting IoT capabilities that we are developing for the health vertical, represent an unparalleled go-to-market comprehensive health and mental wellness offering that is well positioned to realize this long-term upside opportunity and take share against legacy and upstart competitors alike. Together, we will advance healthcare delivery models to address both the physical and mental health and wellness challenges impacting our communities, including mental health, aging, and access to care and resources.

Within TELUS Health, we are leveraging the power of our globally leading technology and our caring culture, to build a healthier future. Through collaboration and efficiency, we are creating better health experiences, and cultivating the seamless flow of healthcare data to yield improved outcomes across the entire health and wellness ecosystem.

TELUS Health and Lifeworks have a shared vision of making it simple and effective for our customers to successfully access and proactively manage their own health and wellness by creating a world-class provider of the most comprehensive suite of employee and family primary and preventative digital healthcare solutions, delivered with an unmatched level of clinical and customer service excellence, and underpinned by our globally-recognized corporate culture of care and brand.

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Transaction Details

Under the terms of the Transaction, LifeWorks common shareholders will receive, at the election of each shareholder, either (i) $33.00 in cash or (ii) 1.06420 common share of TELUS for each LifeWorks common share held, subject in each case to pro-ration, such that the aggregate consideration paid to LifeWorks common shareholders will consist of 50 per cent in cash and 50 per cent in TELUS common shares or (iii) $16.50 in cash and 0.53210 common share of TELUS for each LifeWorks common share held. The TELUS common shares issued to LifeWorks common shareholders in connection with the Transaction will be issued based on a reference price of $31.01 per TELUS common share, representing the volume weighted average price of the TELUS common shares for the 20 trading days ending June 14, 2022. Giving full effect to pro-ration, the consideration for each LifeWorks common share represents $16.50 in cash and 0.53210 of a common share of TELUS.

TELUS has structured the financing for the Transaction in order to maintain a strong and flexible balance sheet consistent with TELUS’ investment grade profile. With over $2.6 billion of available liquidity at the end of the first quarter of 2022, combined with incremental commitments of $1.9 billion from CIBC and Scotiabank, TELUS has the capacity to finance the cash portion of this transaction, including the refinancing of LifeWorks outstanding bank debt.

The Transaction will be effected through a plan of arrangement and is subject to court approval, LifeWorks shareholder approval, the approvals of the Toronto Stock Exchange and the New York Stock Exchange, regulatory approvals and other customary closing conditions. The Transaction will be subject to the approval of 66 ⅔ per cent of the votes cast by LifeWorks common shareholders at a special meeting of LifeWorks common shareholders (the “Special Meeting”) expected to be held no later than August 5, 2022 to approve the Transaction. If such approvals are obtained and conditions are met, closing of the transaction is expected to occur on or about the fourth quarter of 2022.

The definitive agreement between TELUS and LifeWorks provides for a non-solicitation covenant on the part of LifeWorks, subject to customary “fiduciary out” provisions, and a right in favour of TELUS to match any superior proposal. If TELUS does not exercise its right to match, TELUS would receive a termination fee of approximately $94 million should LifeWorks support any superior proposal. A reverse break fee of approximately $140 million would be payable by TELUS to LifeWorks should the transaction not close for regulatory reasons.

The Board of Directors of LifeWorks, having received a unanimous recommendation from a special committee composed solely of independent directors (the “Special Committee”) and legal and financial advice, has unanimously determined that the transaction is in the best interests of LifeWorks and is fair to its shareholders, unanimously approved the Transaction and recommends that LifeWorks common shareholders vote in favour of the Transaction. Directors and senior officers of LifeWorks have entered into support and voting agreements pursuant to which, subject to certain terms and conditions, they have agreed to vote all of their LifeWorks common shares in favour of the Transaction at the Special Meeting.

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