Aimia Inc. soared Aug. 21 after a group led by Air Canada agreed to buy its Aeroplan business for C$450 million ($345 million) in cash, ending a takeover battle for one of Canada’s most popular loyalty programs.
Air Canada and its banking partners sweetened their bid for Aeroplan, winning over Aimia’s board and an activist shareholder that was seeking a higher price. Air Canada initially made a C$250 million unsolicited offer, and later boosted that to C$325 million. Air Canada and its backers will also assume C$1.9 billion of Aeroplan Miles liabilities, the companies said in a statement. Aimia’s shares rose as much as 20 percent before settling at C$4.35 as of 1:33 p.m., for a gain of 13 percent. Air Canada jumped the most in 11 months.
“This transaction, if completed, should produce the best outcome for all stakeholders, including Aeroplan members, as it would allow for a smooth transition to Air Canada’s new loyalty program launching in 2020, safeguarding their miles and providing convenience and value for millions of Canadians,” Calin Rovinescu, chief executive officer of Montreal-based Air Canada said in the statement.
Air Canada’s partners on the purchase include Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Visa Canada. The deal is subject to the conclusion of a definitive agreement, approval by Aimia’s shareholders and other conditions, the companies said.
Earlier this month, Aimia rejected the Air Canada-led group’s bid for the loyalty program, asking for C$450 million and revised terms. Mittleman Brothers LLC, which owns about 17.6 percent of the shares, argued the program was worth more than $1 billion based on its estimates.
“We believe that our acquiescence in agreeing to sell Aeroplan for C$450 million in cash was the best available outcome for all Aimia stakeholders,” the Mittleman Brothers said in an emailed statement. “We appreciate the board’s efforts in pushing for a vastly improved valuation from the initial C$250 million offered, a conditional figure that would have likely been decimated by adjustments.”
The firm said the outcome should leave Aimia with just over C$1 billion in cash to invest in other opportunities, a significant tax loss in Canada and the U.S. to facilitate such transactions, and a net asset value of about C$7.50 a share.
The company’s stock price has been under pressure since Air Canada announced plans last year to launch its own loyalty program and sever ties with Aeroplan. The company also faced a key date in 2024, when credit-card contracts with TD and CIBC expire.
The fact that Mittleman Brothers are supporting the deal “has to leave some investors scratching their heads” as to what exactly happened over the past 15 months since Air Canada announced its plans to abandon Aeroplan, according to Adam Shine, an analyst with National Bank of Canada.
“We’re certainly left wondering how Aimia could trumpet its Plan B strategy with such optimism and yet set a seemingly low Aeroplan value,” he said.
There is also interest in other Aimia assets. In July, Aimia rejected a $180 million bid from Grupo Aeromexico for a minority stake in the PLM Premier rewards plan operator, saying the offer was too low.
The deal would return Aeroplan to Air Canada almost 35 years after it was launched by Canada’s biggest carrier. Following Air Canada’s bankruptcy restructuring, its parent company, ACE Aviation Holdings, spun off Aeroplan Income Fund in an initial public offering in 2005, raising C$250 million. It was rebranded Aimia in 2011.
By Scott Deveau & Natalie Wong