Aimia Inc.’s blue-chip board is putting a bitter feud with two groups of American investors to rest by agreeing to a settlement that will see six directors step down and counter lawsuits from both groups dismissed.
Aimia announced Monday it also agreed to pay out up to $125-million to its preferred and common shareholders in the form of share buybacks. The company has reported an operating loss in 2019 and has been hoping to use its cash to fund acquisitions abroad, so the payout is a significant development.
The two sides have been fighting about the best strategy for Aimia’s future since the company sold its popular Aeroplan loyalty-rewards program late last year. In the aftermath, Aimia backed a strategy built on making more loyalty-program acquisitions, while its largest shareholder, New York-based investment firm Mittleman Brothers, wanted to pivot away from such programs, because the company had struggled to manage them in the past.
The battle spilled out into the open when Aimia board chair Bill McEwan surprised investors by appointing two new directors in July, less than three weeks after the company’s annual general meeting when such moves are usually voted on. The appointments were seen as an attempt to weaken the influence of Mittleman, which owns 23 per cent of the company.
As Aimia and Mittleman countersued each other, a third party, American investor Charles Frischer, called for a proxy vote to shake up Aimia’s board. Mr. Frischer’s group controls at least 5 per cent of the company.
With the proxy vote set for January, Aimia has decided to fold its hand and call a truce. Under a mutually agreed upon settlement, six of Aimia’s eight directors – those seen as aligned with management’s strategy – will step down and the company will work with Mittleman to assemble a new set of directors by Feb. 28, 2020. Aimia and Mittleman have also agreed to drop their lawsuits.
The Aimia directors who have agreed to step down include bankers Dieter Jentsch and Fred Mifflin, who were appointed in July, as well as Mr. McEwan, the chair, who used to run Sobeys Inc.
The settlement raises questions about Aimia chief executive Jeremy Rabe’s future. Mr. Rabe was installed as CEO in early 2018, right before Air Canada launched a hostile takeover bid for the Aeroplan program, and he was originally aligned with Mittleman Brothers, who shook up Aimia’s board in 2018.
However, Mr. Rabe switched sides after the Aeroplan sale and opposed Mittleman’s plans for the company. Considering the fund may control an even larger stake after the share buyback if it does not tender any of its holdings, it could have even more power to oust Mr. Rabe.
Mittleman and Aimia both declined to comment for this story.
Mr. Frischer, who requisitioned the January proxy vote, will also hold some power. However, it is unclear what exactly he hopes to see from the company. Mr. Frischer declined to comment, other than to say he plans on being a long-term shareholder.
Preferred shareholders are the other minority group to win big in the settlement. With little voting power, this class of owners tends to get railroaded in restructuring plans and shakeups, yet this time around they secured a right to participate in the buyback.
Aimia has struggled to win investors back since Air Canada originally announced in 2017 that it would pull out of the Aeroplan program. The airline was Aeroplan’s main partner, and Aeroplan used to deliver roughly 80 per cent of Aimia’s operating earnings.
A year later, the airline launched a hostile bid for the loyalty program, and ultimately purchased it for $516-million last December.
Aimia’s stock climbed 8.3 per cent Monday, closing at $3.93. However, it currently trades for less than half of its value in May, 2017, when Air Canada originally announced it would pull out of Aeroplan.
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Tim Kiladze