Air Canada’s Sweetened Bid Of Aimia’s Aeroplan Business Accepted

Air Canada and its credit card partners sweetened their bid of Aimia’s Aeroplan business first from C$250 to C$325 but were rebuked. Aimia indicated that they would be willing to do a deal at C$450 and that was done this morning. The transaction is expected to close this fall.

Aeroplan was spun off from Air Canada in 2005 when the airline was shedding assets. Last year, the airline informed Aimia that it would not renew its agreement when it was due to expire in 2020 but would rather launch its own loyalty program.

Here’s the announcement from Air Canada:

TORONTO, Aug. 21, 2018 /CNW Telbec/ – Air Canada, The Toronto-Dominion Bank (“TD”), Canadian Imperial Bank of Commerce (“CIBC”), Visa Canada Corporation (“Visa”) (collectively, “the Consortium”) and Aimia Inc. (“Aimia”) announced today that they have entered into an agreement in principle for the acquisition of Aimia’s Aeroplan loyalty business.

“We are pleased to see that an agreement in principle has been reached as Aeroplan members can continue to earn and redeem with confidence. This transaction, if completed, should produce the best outcome for all stakeholders, including Aeroplan Members, as it would allow for a smooth transition to Air Canada’s new loyalty program launching in 2020, safeguarding their miles and providing convenience and value for millions of Canadians,” said Calin Rovinescu, President and CEO of Air Canada, on behalf of the consortium.

The transaction is expected to deliver significant value to Aimia’s stakeholders and the agreement in principle was approved unanimously by Aimia’s Board of Directors upon recommendation by its Special Committee of independent directors.  Mittleman Brothers, LLC, Aimia’s largest shareholder who owns approximately 17.6% of Aimia’s common shares, has provided a lock-up and support agreement under which it has agreed to vote in favour of the proposed transaction.

The aggregate purchase price consists of $450 million in cash and is on a cash-free, debt-free basis and includes the assumption of approximately $1.9 billion of Aeroplan Miles liability.

The transaction is subject to the satisfactory conclusion of definitive transaction documents, Aimia shareholder approval, and certain other conditions, including due diligence, receipt of customary regulatory approvals and completion by the Consortium of credit card loyalty program and network agreements for future participation in Air Canada’s new loyalty program.

Conclusion

C$450 million is a small price to pay to have uninterrupted transformation from the current program to the new one in 2020 or does Air Canada need to even have a new program? They can just rebrand Aeroplan.

Not doing a deal with Aimia would have been quite disastrous for the airline. I wrote couple of weeks back (read more here) what precautions Air Canada fliers could take if they wouldn’t want to redeem on Air Transat, Flair and Porter come 2020 (airlines with Aeroplan would then have agreements with). My advice was to start crediting Air Canada flights to other Star Alliance frequent flier programs.

Banks’ credit cards businesses that are here backing the bid would have bled as well as they had agreements in place with Aimia and Aeroplan past Air Canada divorce in 2020. Consumers would have cut their Aeroplan cards in half or stopped using them.