Quarterhill has entered into a definitive agreement to acquire Conduent’s tolling solutions business in a transaction expected to close before the end of 2026.

The deal will see Quarterhill acquire substantially all of the assets of Conduent’s tolling business for US$70m in cash, subject to customary adjustments, plus common shares representing 7% of Quarterhill’s issued and outstanding shares at closing. Quarterhill said the acquisition is expected to approximately triple its tolling revenue and create a larger tolling platform with capabilities across electronic toll collection, back-office operations and roadside systems.

Upon closing, Quarterhill and the acquired business are expected to have approximately US$2bn of combined backlog. On a pro-forma combined basis, after planned synergies, the combined business would have generated more than US$400m of annual revenue with an adjusted EBITDA margin of between 10% and 15%. Conduent’s tolling business provides end-to-end tolling solutions for government transportation agencies, primarily in the USA and UK.

Its services include electronic toll collection, open road tolling, all-electronic tolling, vehicle detection and classification, automated licence plate recognition, payment processing, customer care, invoicing, video processing, analytics, and back-office and roadside functions. Conduent said the business supports more than 14 million tolling transactions per day.

“This is a transformational transaction for Quarterhill, and one the board enthusiastically supports,” said Rusty Lewis, chairman of Quarterhill’s board. “Conduent’s tolling solutions business brings scale, long-term agency relationships, proven technology capabilities and deep tolling expertise in a core market. The board has full confidence in the management team to bring these businesses together, and we believe the combined platform will be better positioned to serve transportation agencies, expand profitability and create sustainable, long-term value for shareholders.”

Chuck Myers, CEO of Quarterhill, said: “This acquisition materially advances our strategy to build a larger, more focused and more profitable ITS platform. With greater scale, enhanced backlog visibility and meaningful Adjusted EBITDA contribution after anticipated day-one synergies, we believe Quarterhill will have a stronger foundation for long-term growth.”

Conduent said Quarterhill will assume most liabilities associated with the tolling business, including surety bond obligations, which it said will improve Conduent’s financial profile and reduce exposure to non-core obligations. The agreement follows Conduent’s May announcement that it had agreed to sell its public transit business, also part of Conduent Transportation.

“This tolling transaction, alongside the previously announced public transit agreement, advances our strategy to simplify our portfolio, sharpen focus on our core businesses, and strengthen our financial foundation,” said Harsha V Agadi, president and CEO of Conduent. “We are continuing our strategic journey to enhance long-term value creation, including simplifying our business, strengthening the balance sheet, and increasing sustainable free cash flow.

“With more than four decades of experience in tolling, Quarterhill is extremely well positioned to support the Conduent Tolling team and its clients. As we move toward closing, we remain committed to delivering outstanding quality and performance for all transportation clients while ensuring smooth transitions for both clients and associates.”

As part of the transaction, Conduent will receive registration rights and board observer rights in relation to its 7% interest in Quarterhill. The shares issued as part of the transaction will be subject to contractual lock-up arrangements. Completion remains subject to customary closing conditions, including Toronto Stock Exchange approval.