It was a pleasure to be back on the CBC News Weekend Business Panel this Saturday. We had a packed session (we even had to leave a few topics out!), diving into the escalating U.S. tariffs on Canadian goods, the historic leveraged buyout of Electronic Arts, and the ongoing labour dispute at Canada Post.
Here’s a summary of my main points on each topic.
Topic 1: The Impasse at Canada Post
The current labour dispute at Canada Post stems from two fundamentally opposed visions for its future. Management, facing a decline in letter mail from 5 billion to 1.5 billion pieces and stiff competition in parcel delivery, wants a leaner, more agile corporation. The union, conversely, is fighting for job security, investment, and benefits. These goals are, at their core, contradictory.
The corporation’s latest offer, which the union called “a step backwards,” clearly reflects management’s vision. It proposes decent exit packages to reduce headcount, the reclassification of rural offices to allow for closures, and no signing bonus. It’s a cost-cutting proposal, plain and simple.
The stark reality is that Canada Post is currently insolvent, running a $1.5 billion annual deficit. This leaves us with a fundamental choice as a country: do we want to heavily subsidize the corporation to maintain its current scope and service levels, or do we accept a significant reduction in its operations? The current leadership is firmly in the second camp, while the union is in the first. With such a wide gap, a resolution does not appear to be on the immediate horizon.
Topic 2: Escalating U.S. Tariffs on Canadian Goods
President Trump’s latest tariff announcement is a significant escalation of a long-standing problem, particularly for our softwood lumber industry. The core change this time is that there are no carve-outs for CUSMA-compliant goods. These new duties are being stacked on top of a 35.16% in combined anti-dumping and countervailing duties.
The U.S. justification is an accusation of “targeted dumping,” which they calculate using a controversial method called “zeroing.” In simple terms, they essentially ignore fairly priced trades to make the impact of any underpriced sales appear much larger than they are. This policy will hit Ontario and British Columbia the hardest, compounding the economic pressure already felt by the auto sector.
Legally, our options are limited. The WTO’s appeal body is non-functional, a holdover from the first Trump administration. While several legal challenges are pending, Canada has recently dropped two appeals, suggesting we may have a losing hand. The most viable path forward seems to be a negotiated settlement, likely involving a fixed quota on Canada’s total market share in the U.S. Separately, the threat of pharmaceutical tariffs would also disproportionately impact New Brunswick, where up to 7% of the province’s GDP is tied to this sector, dragging it into a bruising trade war.
Topic 3: The Historic Leveraged Buyout of Electronic Arts
The $55 billion leveraged buyout (LBO) of Electronic Arts by a Saudi-backed consortium and Silver Lake is the largest in history, and its structure is fascinating. Unlike typical LBOs, which are often 60-90% debt, this deal is financed with approximately 65% equity. While the total debt ($20 billion) is massive, the high equity stake makes this a relatively low-risk LBO from a leverage perspective.
This deal is part of a larger $3 trillion M&A trend this year, spurred by reduced political uncertainty and lower regulatory oversight. For Saudi Arabia’s Public Investment Fund (which already owned 10% of EA), this is a step forward in its economic diversification strategy. From a business standpoint, EA is an ideal target. As gamer myself, I’ve played several of its franchises like Mass Effect and Dragon Age, together with their real workhorses EA Sports and Battlefield, they generate a stable $2 billion in yearly cash flow, which is very attractive for servicing the debt taken on in an LBO.
The future potential is also a huge factor, which would suggest why there is so much equity into the deal. AI can dramatically shorten game development cycles and reduce costs, potentially unlocking enormous future growth for the industry. While LBOs often lead to cost-cutting that can harm quality, EA’s existing reputation and potential future efficiencies gives the new owners some leeway.
If you missed the live discussion, you can watch the full segment below.
