Virtual provider of physical, mental, and wellness healthcare, Dialogue Health Technologies Inc. (CARE on the TSX), caused a stir in the group insurance industry on July 26, when it announced before markets opened, that it accepted a purchase offer made by Sun Life Financial.

The transaction, with a net value of $365-million, will increase Sun Life's stake in Dialogue to 97 per cent when the deal concludes in the fourth quarter of 2023. The remaining three per cent stake will be held by members of Dialogue's senior management.

Both parties say Dialogue will continue to operate as an autonomous entity based in Montreal, Quebec. They also stated that Sun Life's offer was the best available. The Insurance Portal spoke with Jacques Goulet, president of Sun Life Canada, and Cherif Habib, CEO of Dialogue, to discuss the details of the transaction.

The best offer  

Habib says the agreement with Sun Life was the result of a strategic review process. Several options were considered for the company, he says, including being acquired.

"At the end of last year, our board of directors formed an independent committee to review our long-term strategic plan. Selling was one of the options, but we looked at several ways to increase our market share and maximize shareholder returns," said Habib.

The CEO of Dialogue says they received Sun Life's offer as the reflective process began. "We made sure it was the best offer on the table for all our shareholders. We went through a process with about a dozen parties, and in the end, Sun Life's proposal was the best," he added. Dialogue previously stated that it contacted various financial and strategic potential buyers in North America prior to entering into the agreement.

Habib adds that price was not the only factor in the decision to sell. "Beyond the price, the alignment of values and mission is very strategic between our two companies. Sun Life was already our largest shareholder. It is also our largest business partner," he added.

Growth potential  

In conversation, Goulet praises Dialogue's incredible growth potential. "We started our partnership with Dialogue in 2020, following the pandemic, and later became a 22 per cent shareholder. Becoming a full shareholder, with a small part reserved for management, allows us to accelerate our action plan to become a more significant player in the healthcare field. We achieve this by developing our own solutions, through partnerships or through acquisitions," he explained.

Goulet adds that the transaction will open doors for Dialogue that are "increasingly significant." As an example, he discusses the deal announced on July 13 where Sun Life U.S. will offer Dialogue's platform to American clients.

The president also believes there is already a lot of potential in Canada for Dialogue's solutions, as well. "The healthcare system is under pressure and the role of companies like Dialogue is becoming increasingly important. There are also opportunities outside Canada. Sun Life is present in 28 countries, serving 85 million customers," he says.

Capital to grow  

At the announcement of the transaction, Habib stated that Dialogue aims to improve access to quality care for all. Supported by Sun Life, Dialogue will have the resources and flexibility to pursue its mission. "We look forward to launching more innovative digital solutions to empower people to take control of their health," he said.

In his Insurance Portal interview, Habib recounted the company's beginnings in 2016, when he founded the company with Alexis Smirnov, Dialogue's chief technology officer. "At the beginning, the company provided primary healthcare virtually," he said. It eventually added an integrated healthcare platform that also includes employee assistance, mental health, and wellness programs. According to him, the alignment with Sun Life is even more promising as Dialogue exclusively offers its products to organizations through group insurance.

Not for cost-cutting

Will there be streamlining after the transaction? Absolutely not, Goulet replies.

"The transaction is not at all focused on cost reduction; it is 100 per cent focused on growth. We are committed to keeping the headquarters in Quebec, which is very important for us and Dialogue. There is no staff streamlining or anything like that," he says.

Vow of independence  

Goulet also reiterated that Dialogue will operate independently from Sun Life.

"We will manage Dialogue separately from Sun Life. We want Dialogue to maintain its entrepreneurial spirit. There will be a new board of directors within Sun Life to ensure that Dialogue completes its strategic plan," he explained.

Regarding concerns that the transaction could raise with other insurers that also offer Dialogue, including Canada Life and iA Financial Group, both parties dismissed them. "We want Dialogue to continue working with all the insurers it already works with. Dialogue must remain a platform that serves all Canadians, not just Sun Life's clients," Goulet said.

For several partners, Sun Life's presence is not new, Habib adds. "Sun Life acquired (its) stake in Dialogue in the summer of 2020 and increased its share in November 2021. These partners already have the experience of seeing Sun Life as a significant shareholder. Over the years, they have seen that it has had no negative impact on their relationship and services. On the contrary, Dialogue emerges stronger for all partners," he added.