U.S. f irm may ‘bust heads’ at Aimia AGM

IOf the Record t’s all a bit vague, at least officially, but for the third time in the past six months, a U.S.-based investment manager has made a disclosure about an investment in the Montreal-based loyalty firm best known for the Aeroplan card.

But with Aimia’s annual meeting slated for April 27, chances are New York-based Mittleman Investment Management hasn’t acquired the stake merely for investment purposes. The stock has been on a downward arc for almost four years and is down about 80 per cent since last May when Aimia said it had received a “contract non-renewal” from Air Canada. The current contract remains in effect until June 2020.

Last September Mittleman, a discretionary portfolio management firm providing services to institutional investors and high-networth individuals, filed an early warning report. In that report, Mittleman bought enough shares to put it over the 10-per-cent limit. (It owned 10.4 per cent.)

In February it made another filing (an alternative monthly report) in which it indicated it “owned or exercised control or direction” over 16.118 million shares — or 10.6 per cent of the shares outstanding. Earlier this month, Mittleman filed another alternative monthly report, indicating its ownership had jumped to 22.79 million shares — enough for a 14.96-per-cent interest.

In that March 2 filing, Mittleman, not known for activism, used some new language to indicate it may become active. Mittleman’s website says it “pursues superior returns through longterm investments in what it deems to be severely undervalued securities” and indicates it has handily outperformed the S&P Total return index over the past 15 years.

In the filing’s purpose of the transaction section, Mittleman said “it may in future, seek to effect material changes in the issuer’s business or corporate structure.” Specifically it could seek changes to the board, or management, or “the sale or transfer or material assets,” of the company. Or it could requisition a shareholder meeting “and the solicitation of proxies from the Issuer’s security holders in manner permitted by law.” Mittleman did not respond to a request for comment.

While similar language was used in Mittleman’s Feb. 6 filing, such wording was absent last September when the manager reported “not applicable” to a potential sale or transfer of “a material amount of assets,” to a change in either the board of the management, or to a “material change” in either the capitalization or dividend policy.

One prominent Canadian money manager noted the change by referring to a recent filing Mittleman made with the SEC: Originally the manager made a 13G filing (indicating a passive investment); recently that was upgraded to a 13D filing, indicating it expects to influence the company.

“It sounds like the Aimia shares are in some pretty tough hands, mostly U.S. hedge funds, and they are coming up here to bust some heads,” noted the manager, who asked not to be named. “Mittleman is coming pretty hard and the Aimia board doesn’t have a friend in the world. We think there is a lot of value (in the company) and an activist shake-up would be very welcome.”

Two other managers — Fidelity and Burgundy — filed notices soon after Aimia lost the Air Canada contract indicating they had sold shares.

Another observer expressed similar thoughts. “The messaging (from Mittleman after upping its stake to 15 per cent from 10 per cent) is strong. They are serious,” he noted, adding that it “would be naive” to assume that other investors are not also interested.

Aimia said it “doesn’t comment on regulatory filings. As we always (have) done we will be communicating with our shareholders during 2018.”