An Ernest Opinion

After failing to acquire Cogeco Communications in September 2020, Rogers turned its eyes to Western Canada and announced the acquisition of Shaw Communications on Monday morning for $26 billion ($40.50 per share). Shaw’s legacy business is its wireline footprint in Western Canada with 5.1m consumer and small business subscribers in B.C, Alberta, Manitoba, and Saskatchewan. Rogers has no cable footprint in these provinces and does not directly compete with Shaw for wireline subscribers.

Almost exactly one year ago with the world teetering into the COVID-19 crisis, I wrote a blog discussing some thoughts on investing through a crisis and in the blog, I outlined four criteria that investors would be well-served to follow.

TFI International (formerly known as Transforce) is a gritty business that doesn't capture the imagination of r/wallstreetbets, but through skillful operations and capital allocation has delivered very healthy returns to shareholders over time: a $1 investment when current CEO Alain Bedard took over in 1996 is now worth over $200 vs about $2.70 for the S&P/TSX index.

While historically the benefits to Constellation Software of remaining as one company have been significant, it is now on the verge of it's first ever spin-out of a major division - Topicus.com. In this blog, Ernest outlines the reasons Constellation is taking this step and concludes that this is simply the next step in their evolution into a mature organization.

Constellation Software is well known to be a serial acquirer of small vertical market software (VMS) companies, having purchased 500 or so of these in it's history and the results speak for themselves. A $1 investment in Constellation Software 10 years ago would be worth nearly $40 today, compared to only $1.30 for the TSX index. In this blog, Ernest outlines some of the challenges ahead for Constellation as it has grown to become a global conglomerate and how CEO Mark Leonard is saying he will approach the issue.

In early September, US cable provider Altice USA and Rogers Communications made a joint bid to acquire Cogeco Communications and its parent Cogeco Inc (I will refer to both as Cogeco). The proposed deal would have Altice acquiring Atlantic Broadband, the 9th largest cable provider in the US, and Rogers, Cogeco’s largest shareholder, acquiring the Canadian assets, mainly a cable footprint in Ontario and Quebec and giving Rogers an entry into Quebec. The deal was quickly rejected by Cogeco with President Louis Audet stating Cogeco was definitively not for sale. Despite this categorical rejection, the would-be buyers increased their bid by about 10% to $11 billion in mid-October. Not surprisingly, the increased offer was again summarily rejected by the Audet family.

Ernest paints a picture of the Canadian grocery sector and how each of the main competitors are approaching e-commerce and which one, he thinks, will be the winner.

Most everyone thinks that housing prices in Toronto are a bubble, waiting to burst. That makes the housing market’s resilience during COVID even more surprising: the MLS Home Price Index was up 7.7% in June with sales volumes back at prior year levels.