• Israel strikes Iran’s nuclear footprint

• Building permits miss big

• Telus offers $550M to re-absorb digital unit

• The Pentagon Pizza Report

• TransAlta jumps 9% on upgrade

Geopolitical tensions rise as Israel strikes Iran

The geopolitical backdrop just got scarier, with Israel striking Iran’s capital and declaring a state of emergency ahead of a counter-attack. This is sure to be the driving force in markets near-term… expect volatility (VIX):

Futures are ugly, gold has a bid, and crude oil surged more than 10% on the news given Iran accounts for 4% of global output.

As for Canadian equities, expect the oil producers and defense names to trade higher. It’s starting to become clear why Carney is pulling forward defense investment… let’s hope things de-escalate soon.

Building permits fall on multi-unit weakness

Wednesday’s building permit data disappointed, falling 6.6% M/M versus expectations for a 2.2% increase. The Y/Y figure is uglier - down 16% - though I’d note last April was a pretty tough comp.

The second sequential drop was largely driven by multi-unit activity, which fell more than 15% due to weakness in Vancouver and dragged total residential permitting down nearly 12%.

Non-residential activity showed resilience, gaining 3% on strong commercial and industrial activity in Ontario (up ~21%), partly offset by weakness in BC.

Telus looks to swallow digital unit for $550M

After spinning it off in a frothy 2021 IPO market, Telus (T) is looking to re-absorb Telus International (TIXT) for a skinny 15% premium - in a $550M deal that looks accretive on an EBITDA basis.

The deal isn’t all that surprising, given Telus already owns nearly 60% of TIXT and accounts for a quarter of its revenue.

The offer values the IT business at just over $1B - not much higher than the ~$900M paid to it annually from Telus and small enough to not impact the leverage profile.

With TIXT shares closing above the offer, the market expects a competing bid or a sweetener - but if Telus can get this over the line it’s a near-term win. The long-term implications are muddier, as investors are unlikely to forget the 90% drawdown that preceded this transaction…

… which could impact the price tag on future spin offs, Telus Health in particular.

The U.S. has denied any involvement in the latest escalation in the Middle East, though an X account tracking pizza shops near the Pentagon suggests they were made aware at some point…

… there really is a place for everything on the internet (25K followers and growing).

• WSP Global signs deal to buy engineering consulting firm Ricardo

• goeasy surpasses $5B consumer loan portfolio

• Dollarama announces private offering of $600M senior unsecured notes

• Northland Power achieves first power on Hai Long offshore wind project

• CPKC announces $1.4B debt offering

TransAlta ran ~9% on an upgrade from Jefferies, citing “higher for longer” power prices in Alberta, where the company has a lot of merchant exposure (no contract, they receive spot pricing and hedge against that).

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