Highlighting Unique Companies in Canada that Create Value
Some of you may have seen the recent news release flash across your phone or television that Telus has purchased another Canadian company, Lifeworks Inc for $2.9B. What you may not know is that this is a holding in the Jarislowsky Canadian Equity Fund (which is part of the Jarislowsky Balanced Fund) and an example of how they select unique and profitable businesses from across Canada.
These businesses may not fit the traditional mold of Financials, Energy and Materials, which represent nearly two thirds of the TSX index. For reference, Jarislowsky Fraser maintains some stake in the financials and materials, but these sectors represent only 30.7% of their total Canadian Equity holdings.
Lifeworks is a great example of a creative, high growth business model that Jarislowsky Fraser identified and invested in. They offer digital and in-person solutions that support the total wellbeing of individuals – mental, physical, financial, and social. Lifeworks is representative of the types of businesses that Jarislowsky is overweight in the Canadian Technology market, and they will benefit from the ~80% premium which Telus paid over the current market capitalization earlier this week.
The chart below shows the year-to-date price of Lifeworks shares, which opened the year at $25.60, before falling to $15.42 in late May. Telus stepped in and offered $33 per share, and the market reacted, driving the price to over $30.
This acquisition may be representative of some coming consolidation and privatization across the Canadian market as current valuations may be attractive for larger, cash rich firms, to look vertically integrate suppliers or improve their distribution reach.
Market volatility has been severe in the first 6 months of the year however, firms with diligent capital planning and acquisition opportunities could stand to benefit from these conditions and Jarislowsky is continually monitoring these opportunities and how they may play into their future portfolio.