The fight to control Aimia Inc.’s future is escalating after a second set of shareholders questioned the Canadian loyalty program provider’s leadership and launched a campaign to shake up its board of directors.
The shareholders, who collectively own at least 5 per cent of the company and who include LFF Partners and LARC Capital Holdings, have requested a special meeting to nominate four directors to Aimia’s board, according to a statement released on Thursday. The shareholders also want to boot the four longest-serving directors on Aimia’s board – a group that includes chief executive Jeremy Rabe.
The proposal opens a new front for Aimia to fight after the company’s largest shareholder, Mittleman Brothers, voiced its opposition to Aimia’s current strategy and suggested it may propose its own slate of directors. The battle turned fierce in July when Aimia sued Mittleman. This week, Mittleman countersued members of the company’s leadership team and board, alleging defamation and misleading representations.
Aimia’s business strategy lies at the heart of the battle. Since selling the Aeroplan loyalty program to Air Canada late last year, Aimia has pledged to acquire businesses in the loyalty rewards market. Mittleman and the second group of shareholders oppose this plan because they believe Aimia has struggled in this market.
Air Canada and Aeroplan had been partners for years, but, in 2017, the airline announced plans to pull out of Aeroplan in favour of building its own internal program. The news sent Aimia’s shares plummeting because Aeroplan delivered roughly 80 per cent of its operating income. Air Canada eventually changed course and decided to buy Aeroplan instead, paying $516-million. A few months after the deal’s announcement, Toronto-Dominion Bank agreed to pay Air Canada $1-billion to be the program’s lead financial partner.
“The sale of Aeroplan was an abomination – a giveaway,” Charles Frischer, who spoke on behalf of the dissident shareholders, said in an interview.
Aimia has also tried to expand outside of Canada by acquiring other loyalty programs and at times this strategy has come back to haunt the company. Notably, Aimia paid $755-million for the Nectar rewards business in Britain in 2007, but ultimately sold the business in early 2018 for a net price of $34-million.
“I don’t like the loyalty space,” Mr. Frischer said. “There will be no loyalty acquisitions if I have anything to say about the process.” Instead, the dissidents have proposed share buybacks in the near future.
His group’s proposed slate of directors includes two Canadians: retired corporate lawyer Joel Schachter and financier David Rosenkrantz. The other proposed directors are two Americans: Mr. Frischer, who is a general partner of Seattle-based LFF Partners, and Michael Lehmann, who runs money manager LARC Capital.
If their campaign for board seats is successful, the shareholders are likely to replace Mr. Rabe as CEO. “I don’t think that Jeremy is going to be in the long-term picture at Aimia if I have anything to say," Mr. Frischer said.
Mr. Rabe became CEO and joined Aimia’s board through a proxy battle launched by Mittleman in early 2018. However, since joining the company he has switched sides and is now at odds with Mittleman.
In the countersuit that Mittleman filed this week, the New York-based fund took aim at Mr. Rabe, alleging that during the negotiations with Air Canada he tried to secure a position at the airline to run Aeroplan. Mittleman also alleged that former Aimia board chair Bob Brown was part of the talks.
“For Mr. Brown and Mr. Rabe to be negotiating with Air Canada for a position for Mr. Rabe at Air Canada at the same time as they were negotiating the Aeroplan agreement on behalf of Aimia was a clear conflict of interest,” the lawsuit alleges.
Dan Gagnier, a spokesperson for Aimia, said the company is reviewing the allegations and that it intends to “vigorously dispute” the allegations and claims made. The company also said in a statement that it is reviewing the requisition for a special meeting of shareholders.
In an e-mail, Evan Newman, a partner at Mittleman, said the fund has not had any contact with the requisitioning shareholder group. “We welcome the opportunity for shareholders to freely make their views known with regard to Aimia’s board. We will give due and thorough consideration to their nominees,” he wrote.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.