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Air Canada-led consortium to buy Aeroplan program from Aimia

Last Updated Aug 21, 2018 at 7:03 pm EST

A consortium led by Air Canada has reached a deal to acquire the Aeroplan loyalty program from Aimia Inc.

The group, which includes TD Bank, CIBC and Visa Canada Corp., has agreed to pay $450 million in cash and assume the approximately $1.9-billion liability associated with Aeroplan miles customers have accumulated.

“We are pleased to see that an agreement in principle has been reached as Aeroplan members can continue to earn and redeem with confidence,” Air Canada chief executive Calin Rovinescu said in a statement on behalf of the consortium Tuesday.

Read Air Canada’s complete statement here.

The price is up from an initial offer of $250 million in cash and the assumption of the reward point liability in July that was rejected by Aimia.

Aimia shares were up more than 11 per cent at $4.30 in mid-day trading, while Air Canada shares were up 7.36 per cent at $26.54.

“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,” said GMP Securities analyst Martin Landry.

National Bank Financial analyst Adam Shine said he was “left wondering how Aimia could trumpet its Plan B strategy with such optimism and yet set a seemingly low Aeroplan value.”

The Aeroplan deal is expected to close this fall.

The agreement, which is supported by Aimia’s board and Mittleman Brothers, Aimia’s largest shareholder, is subject to shareholder approval and other closing conditions.

Mittleman Brothers, which holds a 17.6-per-cent stake in Aimia, defended the investment firm’s “acquiescence” in the deal, calling it “the best available outcome for all Aimia stakeholders.”

The bid would leave Aimia with more than $1 billion in cash to invest elsewhere, the New York-based investment firm said in a statement Tuesday.

Christopher Mittleman, chief investment officer of the New York-based company, bristled earlier this month at a $325-million offer from the consortium, calling it “coercive” and “blatantly inadequate” in an open letter to Aimia’s board.

Mittleman had recommended that Aimia accept no less than $1 billion, “especially not with a gun held to its head by its key commercial partners.”

Aimia’s recent Aeroplan partnership agreements with Air Transat, Flair Airlines and Porter Airlines are now up in the air.

Aimia had also been in discussions with the Oneworld airline alliance, whose members include British Airways, American Airlines and Cathay Pacific.

Aimia management said in a conference call this month it has considered more asset sales and a wind-up of the company, analysts noted — one speculated it resembled a “holding company with limited assets.”

“With the sale of Aeroplan, the focus for Aimia investors will shift to actual net proceeds received from the sale and the company’s subsequent capital redeployment strategy,” RBC Dominion Securities analyst Drew McReynolds said.

The future of the program has faced questions since Air Canada announced last year that it planned to launch its own loyalty rewards plan in 2020 when its partnership with Aimia expires.

Air Canada created Aeroplan as in-house loyalty program, but it was spun off as an independent business as part of a court-supervised restructuring of the airline. At the time, CIBC was Aeroplan’s main bank partner.

Since 2014, TD has been Aeroplan’s main Visa card partner although CIBC continues to offer cards that earn Aeroplan points that can be redeemed for Air Canada flights and other rewards.