Aimia open to negotiating fair deal with Air Canada, says CEO.
Shareholders urge higher price for loyalty firm
TORONTO • Aimia Inc.’s chief executive said the company will continue to negotiate with Air Canada over the future of its Aeroplan loyalty program, hours after announcing it had secured a deal with Porter Airlines to make it its new preferred partner.
Aimia chief executive Jeremy Rabe told analysts on a conference call Friday that the company would be “happy to entertain” further discussions with Air Canada and its three partners, which made a bid to purchase its loyalty program last week.
“We never stopped negotiating,” Rabe said. “At the same time, we feel very confident about our future plans.”
Under Rabe, who was appointed CEO in May, Montreal-based Aimia has been bolstering attempts to prove its value as a stand-alone company after Air Canada announced plans last year to sever ties with the loyalty program to start its own
Aimia announced Friday it had struck a deal with Porter that would see it become a preferred airline and redemption partner for its Aeroplan program beginning in July 2020, when Aimia’s partnership with Air Canada expires.
Rabe said that Aimia had been in discussions with Porter for “some time,” but that Air Canada’s bid to purchase the Aeroplan program “accelerated the speed of those discussions and made things come to a crystallized fashion more quickly.”
Air Canada surprised the market last week when it partnered with Canadian Imperial Bank of Commerce, Toronto-Dominion Bank and Visa Canada Corp. to make a bid for Aimia’s Aeroplan program — the same one it spun off more than a decade ago.
The initial offer was for $250 million in cash, plus the assumption of $2 billion in Aeroplan points liability. The bid was recently bumped up to $325 million, but Aimia said it still fell short of what it believes to be the fair value of the program. Aimia is asking for $450 million, which is substantially less than the $1 billion its largest shareholder, Mittleman Brothers, had suggested.
“We went through and did a variety of valuation techniques ... there’s just no way you can get to a number like $325 (million), whether it’s conditional or not,” Rabe said. “We think that $450 million was a very fair offer. We have a number of shareholders that are frankly pretty upset that we offered a number that low.”
A representative of one of those upset shareholders — Cetus Capital — voiced concerns about Aimia’s offer on the conference call Friday.
“We’re scratching our heads as to why the offer is so low, in light of the significant and substantial strategic and financial benefits to Air Canada and the consortium partners,” Bart Stout said, adding that adding Aeroplan would add hundreds of millions, if not billions, of value to Air Canada.
“We continue to believe that Air Canada is acting very penny-wise and poundfoolish as it related to their tactics here ... Frankly, we believe the value that they should be acquiring Aeroplan for should be significantly more than $450 million.”
Rabe responded by saying Stout was “spot on” with his arguments.
“We felt like $450 (million) was a very, very reasonable number and if there was a real willingness to engage from the consortium that would have been accepted,” he said. “It just kind of leaves you wondering if there was a real willingness or not.”
Last week during a conference call following the release of second-quarter results, Air Canada’s chief executive Calin Rovinescu called the original bid of $250 million plus $2 billion in liability “extremely generous.”
“We believe there is no other party out there prepared to accept this $2 billion liability, nor any other buyers for the company,” he said, adding that the airline would still pursue its own in-house loyalty program should Aimia reject its offer.
“We have not abandoned our plans to launch our own loyalty plan in 2020,” Rovinescu said.
Porter will be a redemption partner, offering up to 60 per cent of its seat inventory for Aeroplan customers at fixed-rate prices.
Aimia also said Friday that it is having ongoing discussions about a potential partnership with Oneworld Alliance, which includes American Airlines, British Airways, Cathay Pacific, Qatar Airways and Qantas, among several others.
Aimia shares jumped eight per cent to close at $3.74 in Toronto, taking their gain since Air Canada unveiled its initial offer to more than 45 per cent. The stock lost 72 per cent of its value between May 2017, when Canada’s biggest airline said it would pull out of Aeroplan, and the day before the offer was announced. Air Canada rose two per cent to $23.73.