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A Telus Corp. sign on their downtown Vancouver building, on June 21, 2007.

Chuck Stoody/The Canadian Press

Telus International is looking to raise roughly US$500-million in an initial public offering, in what’s expected to be the first of several public spinouts by its telecom parent Telus Corp. (T-T)

Telus International, which provides outsourced customer service for brands such as Fitbit, Uber and online gamer Zynga, kicked off a roadshow Monday to market its IPO. The Telus subsidiary is expecting to price its IPO at between US$23 and US$25 a share, which would value the IT and business services company at more than US$6-billion.

The shares are expected to begin trading on the Toronto Stock Exchange and New York Stock Exchange by the end of March under the ticker TIXT.

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Going public will give investors greater insight into Telus International’s performance and give it a valuation more suitable for a company in the high-growth digital customer service space, according to analysts. Previously, Telus International’s results were reported within a segment of its parent referred to as wireline, which also includes the telecom’s internet and television operations and its Telus Health and Telus Agriculture subsidiaries.

“Wireline telecom is a relatively mature business,” said Edward Jones analyst Dave Heger, noting that traditional wireline telecom companies typically trade at high single-digit multiples of their earnings before interest, taxes, depreciation and amortization. Telus International, in contrast, is being valued at roughly 15 times its EBITDA. “Outsourced customer service would likely grow at a somewhat faster rate,” Mr. Heger added.

In the public market debut, Telus International will offer 33.33 million subordinate voting shares, including 21.93 million from its treasury and 11.40 million from its owners, Telus and Baring Private Equity Asia.

Telus International expects to raise about US$493.9-million if it prices the IPO at US$24 a share, according to an updated prospectus filed Monday with the U.S. Securities and Exchange Commission.

With roughly 266.5 million subordinate- and multiple-voting shares outstanding after the IPO, the pricing values Telus International at between US$6.13-billion and US$6.66-billion. (Telus will maintain control over its subsidiary through ownership of multiple-voting shares that each cast 10 votes, while public investors will own subordinated voting shares that have one vote each.)

Telus International started out 15 years ago as a call centre operator for Telus and a handful of U.S. technology and telecom firms. It soon expanded into areas such as moderating content online, developing and supporting mobile apps and building virtual assistants such as chatbots.

In 2016, Telus Corp. sold a 35-per-cent stake in the unit to Baring Private Equity Asia. In 2019, the Hong Kong-based private equity firm partnered with Telus International on a $1.3-billion acquisition of Competence Call Center, a Berlin-based content moderator.

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That deal was followed by a $1.2-billion acquisition of Lionbridge AI, a data-annotation company, in late 2020. The Lionbridge acquisition is under review by the Committee on Foreign Investment in the United States, which examines the national security implications of foreign investments in U.S. companies.

Telus is expected to expand its Telus Health and Telus Agriculture subsidiaries in a similar way – building them both organically and through acquisitions before spinning them out via initial public offerings. Mr. Heger said Telus Health – which provides electronic medical records, virtual care and other health-related services – is more mature and would likely go public first. That business launched in 2008, when Telus acquired Emergis Inc., a Montreal-based electronic medical records business once owned by its rival BCE Inc., for $763-million. Telus’s foray into the agricultural technology sector, meanwhile, began about two years ago.

However, it’s unclear how those businesses are performing. “We are still working with relatively limited (and somewhat dated) financial disclosure with respect to Telus Health and AgTech,” Canaccord Genuity analyst Aravinda Galappatthige said in a note to clients.

Telus International also released preliminary financial results on Monday for the year and the three-month period ended Dec. 31. The division had between US$95-million and US$102-million in profit last year on estimated revenue of US$1.57-billion to US$1.58-billion. (The company notes these figures could change once the results are finalized.)

After the IPO, Telus is expected to hold roughly 66.6 per cent of the combined voting power over Telus International, while Baring Private Equity Asia is expected to hold roughly 31.5 per cent. Those figures change to 68 per cent and 29.9 per cent, respectively, if the underwriters exercise in full their 30-day option to purchase up to five million additional subordinate voting shares at the IPO price, minus underwriting discounts and commissions.

J.P. Morgan Securities LLC and Morgan Stanley & Co. will act as lead underwriters for the IPO. Barclays, BofA Securities and CIBC Capital Markets will also act as underwriters.

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