Air Canada leads group in hostile bid to purchase Aeroplan

Air Canada and a pair of large Canadian banks surprised the market Wednesday with a hostile $2.25-billion bid for Aimia Inc.’s Aeroplan rewards program.

The bid also created a buzz on Bay Street because it comes a little more than a year after the airline announced plans to allow its arrangement with Aimia to expire and launch its own in-house loyalty program, set to begin in 2020. “The optics of what has transpired between Air Canada and Aimia over the past 16 months are sure to raise some eyebrows,” said Doug Taylor, managing director of technology and aerospace equity research at Canaccord Genuity in Toronto. “However, the short response from Aimia today does suggest Air Canada has approached Aimia in good faith privately in an effort to reach a resolution before making a hostile offer.”

Aimia’s statement said the marketing and loyalty company had created a special committee of independent directors during those discussions, and had engaged legal and financial advisers to assess the proposal. The bidding consortium includes Canadian Imperial Bank of Commerce and Toronto-Dominion Bank, which offer credit cards associated with the Aeroplan loyalty program, and Visa Canada Corp. The bid is comprised of $250 million in cash plus the assumption of $2 billion in Aeroplan points liability. The cash component is equivalent to $1.64 per Aimia share and the consortium said its proposal implies a value of approximately $3.64 per share, representing a 46-per-cent premium to Aimia’s share price close on July 24.

Aimia shares were trading above $8 before Air Canada’s May 11, 2017, announcement that it would let its commercial arrangement with Aimia expire and launch is own loyalty program in 2020. According to a news release, the group, if successful, plans “a smooth transition of Aeroplan members’ points to Air Canada’s new loyalty program.” Two sources who specialize in mergers and acquisitions said there appears to be little to challenge from a legal or business practices perspective. Air Canada was entitled to let its arrangement with Aimia expire, said one, while the other noted that the consortium is putting a value on the loyalty business, rather than trying to buy the company’s underlying shares. Financial analysts suggested a successful purchase of the loyalty business by the consortium would be positive for the airline, the banks, which would protect credit card market share, and Aeroplan loyalty customers, who would not have to deal with a potentially messy transition and the possible revaluing of earned rewards. Ben Cerniavsky, an analyst at Raymond James, said the net financial implications remain unclear. However, he deemed the bid “shrewd,” noting that it removes the spectre of potentially costly competition.