Telus International acquires US mobile app company for $1 billion | Techy Kings

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In its biggest deal to date, Telus International Inc. is acquiring U.S. mobile apps and technology company WillowTree for $1.2 billion as the digital services provider bids to expand its customer base.

Vancouver-based Telus International, which is controlled by Telus Corp., is paying $1 billion for WillowTree, including $125 million. USD will be settled in Telus International shares. The remainder of the acquisition will be paid in cash. The company will also assume additional 210 mln. US dollar debts.

Some members of WillowTree’s management team agreed to reinvest a total of $160 million in shares. can be cashed out if the company meets certain performance targets.

While the acquisition didn’t come cheap, WillowTree’s expertise in mobile technology will help fill a gap in Telus International’s expertise and add a variety of high-profile clients and new industries to its portfolio, analysts say. But some observers have expressed concern about the leverage the company has taken.

WillowTree, founded in 2008 Based in Charlottesville, Washington, it presents itself as a full-service digital product consultancy offering software, design and marketing tools to businesses expanding their online presence. The company employs more than 1,000 people in Canada, South America and Europe. According to data provided by Telus International, in 2021 WillowTree’s revenue was approximately $140 million. US dollars, which is 50 percent more than last year.

Majority shareholder Insignia Capital Group will sell its WillowTree stake after the 2018 IPO.

The transaction is in line with Telus International’s long-term strategy to develop full-service technology consulting offerings. CEO Jeff Puritt told The Globe that the acquisition will help position the company as a top technology consulting firm at a time when businesses developing their digital strategies are struggling with inflation, supply chain issues and the ongoing recession. .

“I think it’s more important than ever to have the capability to address and mitigate … those fears, those concerns and deliver on time as promised,” Puritt said.

He said the acquisition will help the company grow its business especially in the health, agriculture and consumer goods sectors.

In a note to investors, Desjardins analyst Jerome Dubreuil said that despite the high price given the depressed valuations of many companies in the tech sector, the deal’s rationale was nonetheless strong, noting that WillowTree’s expertise will help expand Telus’ mobile applications . was not one of the main competencies of the company until now.

WillowTree will also bring a Fortune 500 client list, including PepsiCo. Inc., Fox Corp., Marriott International Inc. and the CBC.

Nevertheless, the markets reacted negatively, with shares of Telus International down a percentage point on the day

Credit rating agency Moody’s Investors Service said in a note to investors that the acquisition is credit negative, meaning the added debt has pushed the company’s bond into an overleveraged position. However, Moody’s maintained the company’s bond rating at Baa1, this means that bonds are subject to average credit risk.

“The outlook for Telus is currently negative as we question management’s willingness and ability to reduce debt without spending proceeds from stock or asset sales used to reduce debt,” analysts Peter Adu and Paresh Chari wrote in a note.

The deal is expected to close in 2023. month of January. and it must be approved by legislation.

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