CSU: Acquisition of Conduent's Public Transit business is another sign of rising capital deployment

Research evidence excerpt

CSU: Acquisition of Conduent's Public Transit business is another sign of rising capital deployment

EQUITY RESEARCH QUICK TAKE

RBC Dominion Securities Inc.

Paul Treiber, CFA (Analyst)

Steven (Pei Wen) Lin (Associate)

Ty Sullivan (Associate)

May 22, 2026

Constellation Software Inc.

Acquisition of Conduent's Public Transit business is another sign of rising capital

deployment

TSX: CSU | CAD 2,709.83 | Outperform | Price Target CAD 4,500.00

Sentiment: Positive

Constellation to acquire Conduent's Public Transit businesses for $164MM. After market close yesterday, Conduent (NASDAQ:

CNDT) announced that it is divesting its Public Transit business to Constellation's Modaxo subsidiary for $164MM. The acquisition

consists of Conduent's Transit Fare Management and Fleet Management Solutions business units. The acquisition is expected to

close before the end of 2026. This marks Constellation's second acquisition of business units from Conduent. In May 2024, Modaxo

acquired Conduent's Curbside Management Solutions and Public Safety Solutions for ~$280MM.

Constellation is paying 0.4x TTM Sales. Based on Conduent's financial disclosures, its Public Transit business generated $386MM

revenue over the last 12 months. The $164MM purchase price implies a takeout valuation multiple of 0.4x TTM revenue, which is

well below the typical 0.8x sales that Constellation typically pays. We believe the lower takeout valuation reflects: 1) higher-than-

typical mix of hardware revenue; and 2) lower-than-typical profitability. It is our understanding that recurring revenue accounts

for approximately 40% of Conduent's Public Transit business revenue. Additionally, Conduent's broader Transportation segment

generated only $18MM adj. EBITDA on $609MM revenue in FY25 (3% adj. EBITDA margins).