Devin Dodge: Okay. Thanks for that. Okay. And then I have a question on CDK. Look, a lot of progress that’s already been made. But one of the remaining goals that you’ve mentioned previously is to upgrade the technology stack. Can you help us better understand the focus there? I’m just trying to understand whether it’s improving the existing product, or bolting on new offerings, and if you expect this effort to be done in-house, or via tuck-in M&A?
Denis Turcotte: Yes. We have been very focused on that over the last eight to 10 months, in particular, starting with hiring two new professionals, one on the product development, one on the technology development. In a nutshell, it’s really transforming from a more historic, structural ERP-type model into something that is more advanced, modern, may incorporate some AI. Definitely much easier user interface. That’s all going to be led internally. We feel we’ve built a very strong capability in particular with these two individuals, so are pressing forward on that as we move forward.
Devin Dodge: Okay. Thanks for that. I’ll turn over.
Operator: Thank you. One moment please for our next question. And our next question comes from the line of Jaeme Gloyn with National Bank.
Jaeme Gloyn: Yes. Good morning. First off, congrats Anuj on the appointment and Cyrus on moving to the EC Chair. Just wanted to start off on the Fab 5 EBITDA. I think I heard this correctly, I just want to clarify. The organic growth in EBITDA for the Fab 5 was 10% year-over-year for – versus the prior year period. And would you have at your fingertips the organic growth of the, let’s say, rest of business?
Jaspreet Dehl: Yes. It’s Jaspreet. On a same-store basis, if you look at the entire business, we’re up about 14%. And adjusted for the dispositions that we’ve done. So on a same-store basis, if you look at Q4 last year versus Q4, 2022, it’s about 14%.
Jaeme Gloyn: That was for the Fab 5?
Jaspreet Dehl: No, that’s for the entire business and the Fab 5 was around 10%.
Jaeme Gloyn: Got it. Okay. Great. Shifting to the Sagen business, obviously, a really great year, and still loss ratio is running below average and good enough to provide a distribution up to BBU. Just wondering, if you could provide a little bit more details on the capital position at Sagen, and perhaps what you have forecasted for ’24 and ’25 in terms of what could be potential distribution from that business?
Jaspreet Dehl: Yes. It’s Jaspreet, again. So look, on kind of full cycle basis, Sagen generates circa CAD 500 million to CAD 600 million there of earnings and cash. They need to make sure they have cash within the business, to meet their regulatory requirements. But on average, that’s been the size of distributions that the business has been doing. So, we don’t expect that, that will change in the near term. The capital position within Sagen is extremely strong today. I don’t know the exact numbers, but against my CAD requirement of 165%, I think they’re in the high 175% or 180% even. So, there’s quite a large buffer. There’s significant cash in the business, which allowed us to do the special distribution. So given kind of the broad market dynamics, if interest rates start to trend downwards, we’re seeing housing activity start to pick up a little bit more.
I think the loss ratios over the long-term will start to creep up and go back to long-term averages. But the business is very well positioned, and I think should continue to be able to generate cash up for BBU.
Jaeme Gloyn: Okay. Great. Understood. And then carrying that question to other businesses, I recall in the past, we kind of talked about some other businesses that had the potential to deliver some distributions. Are you able to provide any more insight, or clarity on what other businesses might be able to distribute to BBU in the near term?
Jaspreet Dehl: Yes. And look, if you look at our business and adjusted EFO takeoff maintenance CapEx, like across the board, the businesses generate significant free cash flow. And we saw a little bit of pressure last year just with the higher interest rates, but it’s still in that $500 million range of free cash flow that’s generated on a run rate basis. So the question really for us is, what is the best allocation of that capital? If there’s opportunities within the business to do bolt-on M&A, delever within that business, or distribution up to BBU. Like in the case of Sagen, that cash is best distributed up to us, and that’s what we do. So there’s, call it, $500-ish million of run rate free cash flow that could come up from the businesses. And then it’s a bit of a decision on a case-by-case basis of what we do.
Jaeme Gloyn: Okay. Understood. I’ll turn it over there.
Operator: Thank you. One moment please for our next question. And our next question comes from the line of Nik Priebe with CIBC Capital Markets.
Nik Priebe: Okay. Thanks for the question. Just going back to the Clarios IPO. It sounds like you’re contemplating a smaller-scale IPO than what might have been attempted a few years ago. In that context, should we expect both the treasury and its secondary component to an IPO? Or would you consider doing an offering entirely from treasury to help facilitate the accelerated repayment of debt? Just wondering if you’ve given some thought to the composition of that yet?
Jaspreet Dehl: Yes. I’d say our focus right now, Nik is very much in making sure that we delever Clarios, to an appropriate level. This is a phenomenal business, and we want to make sure that it’s set up, to trade well in the market. So, we expect the first – the IPO and the offering, will be primary, and it will be used to delever Clarios.
