Aimia Inc. reinvented itself on Wednesday as an investment manager with a new executive team, ending two years of shareholder battles over the company’s strategy following the sale of its Aeroplan loyalty program.
Montreal-based Aimia, a travel loyalty business, announced a series of transactions that will see the company acquire its largest shareholder, New York-based money manager Mittleman Brothers LLC, and merge its loyalty businesses with Waterloo, Ont.-based rival Kognitiv Corp.
Aimia named Philip Mittleman, chief executive officer of Mittleman Brothers, as its interim CEO, a position that is expected to become permanent once the acquisition of his privately owned firm closes. In a release on Wednesday, Aimia said its current CEO, Jeremy Rabe, “stepped down, effective immediately.” Mittleman Brothers owns 25 per cent of Aimia and supported the decision to hire Mr. Rabe two years ago, but the CEO and board of directors subsequently sparred publicly with the fund manager over its plans for the company.
Aimia’s major assets are stakes in several loyalty businesses, plus $350-million of cash that came from the sale of Aeroplan to Air Canada and $700-million of tax losses, which could offset future profit. The company was forced to sell Aeroplan back to Air Canada after the airline announced plans to break the relationship and start its own loyalty program, then made a hostile takeover offer.
Prior to Wednesday’s announcement and Mr. Rabe’s departure, analyst Drew McReynolds at RBC Dominion Securities Inc. said Aimia had “embarked on a consolidation strategy within the global loyalty and travel segment with the intention of deploying excess capital into acquisition opportunities.”
That focused strategy is now history. With Mr. Mittlemen as CEO and his brother Christopher Mittleman joining as chief investment officer and a board member, the company said in a press release: “Aimia is now positioned to invest wherever a suitable opportunity can be identified, in any sector.”
Aimia plans to buy Mittlemen Brothers for US$5-million in cash and four million Aimia shares. Mittleman Brothers was founded in 2005 and there is a third sibling, David, serving as head of sales. The firm is relatively small, with US$317-million of assets under management. The fund manager significantly underperformed benchmarks in recent years, turning in a 3.3-per-cent loss last year, when the S&P 500 rose 31.5 per cent, and averaging a 4.1-annual-loss over the past five years, while the S&P 500 index returned 11.7 per cent annually. Aimia is the fund manager’s largest holding and only Canadian investment.
The deal with Kognitiv will see Aimia contribute its loyalty business, plus $21-million of cash, to the 12-year-old Canadian company, which is led by founder Peter Schwartz, a former CEO at Descartes Systems Group. Kognitiv shareholders will invest $14-million in the combined company, and Aimia will hold a 49-per-cent stake if the transaction closes as expected by May 29.
When the dust settles at Aimia, Philip Mittleman is expected to be running a company with $265-million of cash, a 100-per-cent stake in Mittleman Brothers, 49 per cent of Kognitiv, 49 per cent of a joint venture loyalty program with Aeroméxico and 20 per cent of an AirAsia loyalty program. The number of employees at Amia is expected to fall from 450 to 20.
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