Aeroplan loyalty business to be sold to Air Canada for all-cash purchase price of $450 million

MONTREAL–Data-driven marketing and loyalty analytics company Aimia Inc. has a definitive share purchase agreement with Air Canada for the purchase by Air Canada of all of the issued and outstanding share capital of Aimia Canada Inc., the owner and operator of the Aeroplan loyalty program, for an all-cash purchase price of $450 million on a cash-free, debt-free basis.

By acquiring Aimia Canada, Air Canada will, on the closing of the transaction, assume the assets and employees of the business as well as the liabilities and obligations relating to the Aeroplan loyalty program, including $50 million of negative working capital and $1.9 billion of future redemption liabilities related to outstanding Aeroplan miles (both of which are subject to dollar-for-dollar adjustments based upon the actual amounts at the closing of the transaction) and an estimated $45 million of retirement and other benefit obligations.

The Agreement was unanimously approved by Aimia’s Board of Directors upon recommendation of a special committee of independent directors. RBC Capital Markets acted as financial advisor and has provided a fairness opinion to Aimia’s Board in connection with the transaction.

The transaction is expected to close as soon as practicable after the approval of the transaction by Aimia’s common and preferred shareholders, as well as satisfaction or waiver of other customary closing conditions, including regulatory approvals.

Aimia will hold a special meeting of common and preferred shareholders on January 8, 2019, in Montreal, Quebec, and it has fixed December 6, 2018, as the record date for the special meeting. Aimia shareholders will receive information about the meeting and how to vote in the coming days.

Concurrently with and assuming closing of the transaction, Aimia will repay and terminate its existing credit facility and will defease and redeem its outstanding Senior Secured Notes.

“This transaction delivers significant value to Aimia. Once complete, Aimia will be well-positioned to renew its focus on maximizing the returns from its substantial assets and remaining business lines,” said Robert E. Brown, Chairman of the Board. “The proceeds realized from this transaction will put Aimia in the enviable position of having significant cash and investments on hand and no financial indebtedness, providing the Board a solid foundation on which to make decisions around the Company’s future strategic and capital allocation priorities.”

The Agreement includes customary representations and warranties, indemnity provisions and other closing conditions, including the setting aside of $100 million in a restricted, interest-bearing account on Aimia’s balance sheet to reflect uncertainty around potential future indemnity obligations related to an ongoing income tax audit. The outcome of the audit is not determinable at this time. Were it to result in a re-assessment, Aimia Canada would vigorously contest the merits of any such re-assessment and believes that it is more likely than not that it would prevail in any proceedings.

As previously announced, Aimia’s Board of Directors is actively engaged in reviewing and evaluating the company’s future strategic direction, including as a leading player in loyalty management and it has formed a committee of independent directors for the purpose of receiving and considering Management recommendations.

Beyond the Aeroplan loyalty program, Aimia works with dozens of Canadian and international blue-chip clients. Across its leading roster of clients, Aimia provides tailored loyalty strategy, program development, implementation and management services that empower brands and deliver unique value to millions of loyalty customers around the world. It has a 49% stake in in PLM Premier, S.A.P.I. de C.V., the owner and operator of Aeromexico’s Club Premier frequent flyer program, a 15% stake in Nasdaq-listed purchase intelligence leader Cardlytics, as well as minority interests in Think Big, which owns and operates the loyalty program for AirAsia, and Fractal Analytics, a strategic analytics partner to Fortune 500 companies globally.

Norton Rose Fulbright Canada LLP is acting as legal advisors to Aimia and its Board of Directors. Aimia has also retained Kingsdale Advisors as its strategic shareholder advisor and proxy solicitation agent in connection with the special meeting of shareholders and the shareholder vote.

Agreement provides clarity, smooth transition to Air Canada’s new loyalty program, which is expected to launch in 2020; TD to become the primary credit card issuer for Air Canada’s new loyalty program through to 2030, solidifying TD’s position as Canada’s leading issuer of credit cards

TORONTO–The Toronto-Dominion Bank and Air Canada finalized a long-term loyalty program agreement. Under the terms of the Loyalty Agreement, TD will become the primary credit card issuer for Air Canada’s new loyalty program when it launches in 2020 through to 2030. The Loyalty Agreement was finalized in conjunction with Air Canada entering into a definitive share purchase agreement with Aimia Inc. for the acquisition of Aimia Canada Inc., which operates the Aeroplan loyalty business. The closing is subject to the satisfaction of certain conditions, including receipt of Aimia shareholder approval and customary regulatory approvals. The Loyalty Agreement will become effective upon the closing of the Transaction.

“We’re excited about this agreement, which will bring long-term stability, continuity and value for our TD Aeroplan customers,” said Bharat Masrani, Group President and Chief Executive Officer, TD Bank Group. “We’re pleased to have taken this important step in becoming the primary credit card issuer for Air Canada’s new loyalty program, which reinforces our strength in the Canadian Credit Cards business and positions us well for future growth.”

If the proposed Transaction is completed, TD will pay $622 million plus applicable sales tax to Air Canada, of which $547 million ($446 million after sales and income taxes) will be recognized as an expense during the first quarter of 2019, and $75 million will be recognized as an intangible asset amortized over the Loyalty Agreement term, both of which are expected to be reported as items of note. In addition, TD will prepay $308 million plus applicable sales tax for the future purchase of loyalty points over a ten year period. TD also expects to incur additional pre-tax costs of approximately $100 million over two years to build the functionality required to facilitate the new program. The proposed transaction is expected to reduce TD’s CET 1 ratio on close by approximately 13 basis points.

If the proposed Transaction is completed, TD Aeroplan cardholders will become members of Air Canada’s new loyalty program and their miles will be transitioned. In the interim, TD Aeroplan customers can continue to earn and redeem miles as they do today.

Agreements are key milestones for new Air Canada loyalty program in 2020

Air Canada provided updates on Air Canada’s acquisition of Aimia Inc.’s Aeroplan loyalty business and significant developments for its new loyalty program launching in 2020.

Air Canada, with the financial support of its partners, The Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, and Visa Canada Corporation, has entered into a definitive share purchase agreement with Aimia for the acquisition of Aimia Canada Inc., owner and operator of the Aeroplan loyalty business.

Concurrently with the signing of the share purchase agreement, Air Canada, TD, CIBC and Visa signed various commercial agreements relating to the acquisition, including credit card loyalty program and network agreements for future participation in Air Canada’s new loyalty program, all of which are conditional upon closing of the acquisition of Aimia Canada. Additionally, Air Canada remains in negotiations with American Express, which also issues Aeroplan co-branded products, to secure its continued participation in the Aeroplan program after 2020.

“We are extremely pleased to have concluded the agreement for the purchase of Aimia Canada and to have reached definitive agreements on our co-branded credit card programs with each of TD and CIBC. Subject to closing the purchase transaction, these agreements will produce the best outcome for our customers as well as those of our partners as they will facilitate a smooth transition to our new loyalty program launching in 2020, safeguarding all Aeroplan Miles and providing convenience and value for millions of Canadians. Our program is expected to be one of the best loyalty programs in the industry, which will be exciting for our customers and we are looking forward to communicating details later next year,” said Calin Rovinescu, President and CEO of Air Canada.

The acquisition of Aimia Canada remains subject to Aimia shareholder approval and certain other closing conditions, including receipt of applicable regulatory approvals. The closing of the acquisition is expected to occur in January 2019.

The aggregate purchase price consists of $450 million in cash subject to post-closing adjustments and includes the assumption of approximately $1.9 billion of Aeroplan Miles liability. Air Canada will receive payments from TD and CIBC in the aggregate amount of $822 million. Visa will also be making a payment to Air Canada. In addition, TD and CIBC will make payments to Air Canada, at closing, in the aggregate amount of $400 million as prepayments to be applied towards future monthly payments in respect of Aeroplan miles.

 

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