Why Telus International shares may offer upside as a higher buyout offer looms

Globe and Mail

a day ago

In a market where tech investors are increasingly searching for asymmetric risk-reward opportunities, Telus International (Canada) Inc. TIXT-T has emerged as an intriguing candidate.
In June, 2025, Telus Corporation TU-N proposed to acquire the 42.6 per cent of Telus International – also known as Telus Digital – it doesn't already own for US$3.40 per share. However, Telus International's stock is currently trading at a premium to this offer, signalling market anticipation of a higher final price.
Telus International offers a special situation: A solid floor supported by a credible acquisition offer, paired with a reasonable probability of a revised, higher bid.
Telus International is a digital services and customer experience outsourcing firm with a presence in over 30 countries. It offers a combination of digital IT services, traditional business process outsourcing services, AI data annotation and content moderation – capabilities that support not only third-party clients such as Google, but also Telus Corp.'s T-T growing health care, agriculture and telecom divisions.
Telus International's 2021 initial public offering on the Toronto Stock Exchange was one of the largest tech IPOs in the TSX's history, priced at US$25 per share. Since then, however, the stock has experienced a significant decline, a result of both broader market conditions and internal missteps. This precipitous drop in share price exemplifies what Benjamin Graham, the father of value investing, famously described as the 'manic-depressive' nature of Mr. Market, whose moods can swing wildly and often irrationally.
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Telus International's underlying health isn't as bleak as the market might suggest. For 2025, the firm projects revenues of around US$2.7-billion and adjusted EBITDA of approximately US$400-million. After a period of macroeconomic challenges, the company's key markets are showing signs of recovery, which should lead to higher revenues and earnings going forward. Artificial intelligence also presents a significant opportunity as Telus International plays a key role in enabling AI solutions for its clients.
From Telus Corp.'s perspective, full control of Telus International is strategically important. In a statement, Darren Entwistle, Telus Corp.'s CEO, said this transaction enables enhanced AI capabilities and SaaS transformation across its lines of business, including health care, agriculture, telecom and customer service. Telus Corp. has repeatedly emphasized the importance of digital transformation in its earnings calls which makes Telus International a 'must-have' asset, not merely a financial investment.
Yet, Telus Corp.'s current offer significantly undervalues Telus International, proposing multiples of just 0.8 times revenue and 5.7 times adjusted EBITDA. These figures stand notably below valuations observed in comparable industry transactions. For instance, in May 2025, TaskUs, a close peer to Telus International, was taken private at 1.4 times revenue and nearly seven times adjusted EBITDA. Similarly, in August 2023, Majorel was acquired for 1.4 times revenue and eight times adjusted EBITDA.
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We contend that a 7-8 times adjusted EBITDA multiple is more appropriate for Telus International. This is not only justified by recent peer transactions, but also by the fact that Telus International represents a higher-quality business than many of its direct peers.
Telus International has a strong presence in the growing digital IT transformation segment, a capability significantly bolstered by its acquisition of WillowTree (at an estimated 20 times EV/EBITDA). Moreover, the prevailing cyclical upturn within the industry provides additional justification for a premium valuation.
This situation is a bellwether for how Canadian companies manage the relationship between parent firms and publicly traded subsidiaries. If controlling shareholders can privatize undervalued assets with minimal oversight or resistance, it erodes confidence in the fairness of the market.
Telus has long stood for excellence in Canadian telecommunications. Now, it has an opportunity – and an obligation – to extend that reputation to corporate governance. While Telus Corp. holds over 85 per cent of voting rights, the board of Telus International has established a special committee of independent directors to evaluate the proposal. Their fiduciary responsibility is to minority shareholders and not the parent company.
The disparity in Telus International's valuation versus peers is also unlikely to go unnoticed, particularly by institutional shareholders or proxy advisory firms which have an increasing say on how minority shareholders vote their shares.
For investors buying Telus International stock today, the downside is limited by the current US$3.40 takeout offer, which provides a soft floor. But if the board negotiates an improved offer – say to US$5.00-7.00, which would be more in line with peer EV/EBITDA multiples – investors potentially stand to make substantial gains.
Telus International's current pricing reflects a special situation in transition – a deal that makes sense for the parent, but not yet for minority holders. Whether driven by the board's negotiation, shareholder advocacy or external pressure, the odds of a revised bid are meaningful – and that makes the stock worth a close look for investors with a taste for catalyst-driven value.
Balkar Sivia is the founder and portfolio manager of White Falcon Capital Management Ltd. (www.whitefalconcap.com)
Disclosure: The author and the accounts he manages at White Falcon own shares in Telus International.