Air Canada-led group seeks to buy Aeroplan business

Shares of Aimia Inc. surged as much as 44 per cent after a group led by Air Canada made an unsolicited offer to buy its Aeroplan loyalty business in a deal valued at $2.25 billion, including points liabilities they would assume.

The consortium said Wednesday the proposed transaction would provide continuity for Aeroplan members as well as customers of the Montreal-based airline, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Visa Canada — which all have long-standing relationships with Aimia.

“If completed, the proposed transaction would result in a positive outcome for Aimia shareholders and Aeroplan members, allowing for a smooth transition of Aeroplan members’ points to Air Canada’s new loyalty program launching in 2020, safeguarding their points and providing convenience and value for millions of Canadians,” the group said in a statement on Wednesday.

It wasn’t immediately clear whether Aimia’s board would recommend the offer, which the consortium said was worth the equivalent of $3.64 per share. The group said the offer would expire Aug. 2 but such deadlines are often amended.

Aimia stock rose as much 44 per cent to $3.60 in late morning trading on the Toronto Stock Exchange after the consortium’s announcement. Shares had slipped to $3.42 by around noon.

Under the proposal, a corporation to be formed by the consortium would acquire Aimia’s loyalty business, including roughly $2 billion worth of Aeroplan points obligations as of March 31, 2018, for $250 million in cash. The total purchase price, in turn, is valued at about $2.25 billion.

The future of Aeroplan, which has more than five million members, has been in doubt since Air Canada announced in May 2017 that it planned to launch its own loyalty rewards plan in 2020.

Over the past 14 months, Aimia’s stock had fallen to $2.50 as of the close on Tuesday, down from $8.84 prior to Air Canada’s departure announcement.

The consortium’s proposed transaction surprised analysts, given Air Canada’s plans for its own platform.

“Air Canada’s offer may be difficult to accept for Aimia’s management given that Air Canada had abruptly decided not to renew its contract with Aeroplan last year causing havoc in Aimia’s share price,” said Martin Landry, an analyst with GMP Securities.

Given the magnitude of the transaction, it will likely require a vote from Aimia shareholders.

“We believe they will be tempted to accept Air Canada’s offer despite the sour taste it may leave with some shareholders,” Landry said.

For Air Canada, the transaction “potentially removes the customer relations headache of orphaned Aeroplan members and potential negative goodwill,” Canaccord Genuity analyst Doug Taylor said in a note to clients.

Air Canada created Aeroplan but it was spun off as an independent business as part of a restructuring.