Persistence pays off

Good morning. The Oshawa Generals, an Ontario junior hockey team, apologized to its fans last week after sending an email to season-ticket holders urging them to shower before attending games if they “went to the gym or did something that produced body odour.” Understandably, loyal fans didn’t like being treated like hordes of fetid cretins who never bathe themselves.

This debacle does raise one pressing question: just how bad did the games smell that management felt the need to send out this reminder? 

Today’s reading time is 6 minutes.

Markets: Canada’s main stock index was in the red yesterday as gold and oil prices dipped, offsetting any positive investor sentiment that might have stemmed from new inflation data.

The bidding war for some of Hollywood’s most coveted brands is back on. 

What happened: Warner Bros. Discovery (WBD) has reopened negotiations with prospective buyer Paramount following several hostile takeover bids, giving the Larry Ellison-owned media company a week to submit its best and final offer.

Catch-up: The pressure has been ramping up on Warner Bros. to engage with Paramount. Just last week, activist investor Ancora Holdings acquired a stake in WBD in a bid to pressure the board to reopen talks. 

Why it matters: As one person close to the deal put it, this is the “put up or shut up” moment in the Warner sweepstakes. Paramount has made a big stink about its offers not being taken seriously, and now has a chance to show just how big a cheque it's willing to write. 

Our take: Paramount's pitch to Warner isn’t simply that they’ll cough up more money, but that their path to regulatory approval is far smoother than the Netflix deal. The streamer disputes that, but the Ellison family’s close ties to Donald Trump certainly wouldn’t hurt Paramount's odds of getting a $100 billion-plus merger over the finish line.—LA

Ottawa unveils $470 billion defence plan. The prime minister said Canada will spend $180 billion on military procurement over the next decade, as well as another $290 billion on defence infrastructure. Carney, who has pledged to hit NATO’s 5% of GDP defence spending target by 2035, said in his remarks yesterday that Canada has “relied too heavily on our geography and others to protect us.” (Bloomberg News)

Inflation ticked down to 2.3% last month. Canada’s annual inflation rate dropped slightly from 2.4% in December, thanks to gas prices falling by over 16% compared to the same month last year. It was a different story for food prices, which climbed over 6% from December and 7.2% from January 2025. (The Canadian Press) 

Apple is fast-tracking its new AI wearables. The tech giant is reportedly accelerating the development of its debut smartglasses, as well as a new AI pin that’s designed to be worn on your shirt. Apple shelved its wildly expensive (and unsuccessful) Vision Pro headset to focus on a slimmer smartglasses design similar to Meta’s. (TechCrunch)

📡 What else is on our radar: 

🤝 Meet David Thomas. He had a front-row seat to the Canadian business world for several decades in Toronto, serving twice as editor of the Financial Post and leading the reporting team at the Globe and Mail’s Report on Business. His latest book, The Fairfax Way, details the rise and stall — and rise again — of one of corporate Canada’s least well-known but most successful ventures, Fairfax Financial.

Let's cover the basics: what is Fairfax Financial, who is Prem Watsa, and why should Canadians care?

I think this is a great, inspirational story that transcends business. It’s Canadian. It’s entrepreneurial. It’s an immigrant’s $8-in-his-pocket to billionaire story. And there are a few layers on top of all that: On performance, Fairfax is one of the best-performing stocks in the past 40 years but they never courted any attention and tried to do things their own way with an enlightened approach to doing business. The company has delivered almost 20% in compound annual returns over four decades, which is more than double the pace of Canada’s largest companies as measured by the benchmark TSX index in Toronto.

And they are ones to watch all over again, because they are kicking things into top gear after falling off investors’ maps for a long stretch.  

How does Fairfax resemble Warren Buffett's Berkshire Hathaway? Are there important ways it differs?

I don’t think Prem likes the posturing of being known as Canada’s Warren Buffett, but yes, there are a lot of similarities. The whole idea of an investing company buying insurers was to generate profits from them but also have access to the float, which is the cash that insurers need to hold in order to pay out future insurance claims. For smart investors, that float can act like free leverage because they get to keep the gains before paying out the principal.

Berkshire is famous for buying U.S. blue chips and is concentrated in a limited number of big names – like Apple, Coca-Cola, Occidental, and American Express. For Fairfax, the focus is more diverse and spread across the globe. Its holdings are global and often don’t trade publicly. Major holdings are Greece’s Eurobank and the Bangalore airport in India. These days, resource stocks are back in play, and Fairfax has exposure to a lot of Canadian stocks in gold, copper, energy, agriculture, and royalties.

Very, very few people will build a $55 billion company like Fairfax, but many of our readers lead successful, if somewhat smaller, ventures. What lessons do you think entrepreneurs like them can take away?

One of the core principles that resonates is decentralization. When you do it right, you pass down accountability and entrepreneurship to the people closest to the action. Fairfax has since day one tried to retain a tiny presence at the holding company level and to avoid seeking synergies between the almost 30 operating companies (which includes the insurers and non-insurers). That way, the CEOs of those companies are building their own wealth by making their own decisions and not dealing with a fat layer of head office VPs pushing top-down strategies. 

This interview has been lightly edited for length and clarity. Read the full Q&A here.

Catch up on yesterday:

What’s happening today:

Ottawa is hoping that Poland can do a commitment to CANDU.

What happened: Energy Minister Tim Hodgson is pitching Poland on using CANDU reactors, produced by Montreal firm AtkinsRéalis, to power its second nuclear power plant, which is slated to begin construction in 2032. Considering Poland signed a deal with Canada to advance cooperation on nuclear tech, there’s a decent shot this happens.

Catch-up: The last new CANDU reactors were built in 2007, but like other bygone trends of the 2000s, they're making a comeback. Romania inked a deal in 2024 to use CANDU technology for its new nuclear power plants, and old reactors were recently refurbished at Ontario’s Darlington nuclear power plant (under budget and ahead of schedule, no less). 

Why it matters: CANDU reactors are made by a Canadian company, its rights owned by the feds, and over 90% of its supply chain is domestic, including Canadian-sourced unenriched uranium. If they can get even a sliver of the growing international nuclear energy pie, it could generate an economic windfall that will largely stay within Canadian borders.—QH

🖼️ ~US$12 million. How much the Louvre in Paris was scammed out of by a tour guide who took tourists through the museum using the same ticket. Police have arrested nine people in connection with the scheme, which also allegedly involved bribing security guards. Between jewel heists and bribes, the Louvre has some serious security issues to take care of.

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