Aimia squares off against major shareholder seeking to oust entire board

Aimia Inc. AIM-T is seeking to fend off a revolt from its largest shareholder in a dispute that erupted into a war of words on Thursday.

It started early Thursday morning when Mithaq Capital SPC, a family office based in Saudi Arabia that owns nearly 20 per cent of Toronto-based Aimia, announced plans to vote against the re-election of the company’s entire board of directors. Aimia, which sold its flagship Aeroplan loyalty program to Air Canada in 2019 for $516-million, has sought to reinvent itself as an investment holding company.

Mithaq said it has lost confidence in the board and the management team, adding “it would be in the best interests of Aimia to reconstitute the board.” The decision stems from concerns “regarding capital allocation decisions relating to acquisitions,” the statement said.

Hours later, the company fired back, alleging what Mithaq really wanted was for Aimia to support its own investments.

“Many of the investments [Mithaq] recommended would have resulted in substantial losses to Aimia (including one target that subsequently filed for bankruptcy),” the company said in a statement released early Thursday afternoon.

Aimia also said Mithaq had “previously lobbied the company to invest in public securities, including some in which they hold an interest.” An unnamed former insider of an Amia affiliate – who the company claimed was recently terminated for allegedly misusing confidential information – lobbied alongside Mithaq for those investments, the statement said.

All eight Aimia directors – including chief executive officer Phil Mittleman and president Michael Lehmann – will need to win majority shareholder support at the company’s annual meeting on April 18 to remain on the board, according to recent amendments of the Canada Business Corporations Act. With Mithaq now opposing the entire slate, the incumbent directors will need support from close to two-thirds of Aimia’s remaining shareholders.

The Mithaq statement explicitly said it “does not … constitute a solicitation of a proxy,” meaning it was not actively encouraging other shareholders to vote against re-electing the existing Aimia board. Aimia, however, challenged that claim in its own statement.

“Although Mithaq purports to not be engaging in solicitation activities, Aimia understands that Mithaq has retained the services of a proxy solicitation firm and that the terminated insider is attempting to influence shareholders’ votes,” the company said.

Mithaq made no mention of any plans to nominate replacement board members and a spokesperson for the family office declined to comment on its motivations or on the company’s allegations. The timing of its opposition is nonetheless noteworthy, as Aimia has recently made its two largest acquisitions since pivoting away from loyalty programs.

In January, Aimia bought Tufropes Pvt. Ltd. for $253-million. India-based Tufropes makes synthetic fibre ropes and netting for the aquaculture and maritime industries. Then last month, the company paid $332-million for Italian chemical company Giovanni Bozzetto SpA.

“These two companies will form the backbone of our strategy to continue to acquire businesses that generate significant cash flow,” Mr. Mittleman said during a March 16 conference call, noting Tufropes and Bozzetto generated a combined $72-million in adjusted earnings before interest, taxes, depreciation and amortization during their most recent fiscal years.

In 2020, Aimia paid $76-million for an 11-per-cent stake in Chinese outdoor advertising firm Clear Media Inc. That was the company’s first major transaction after the sale of its Aeroplan loyalty program.

The same year, Aimia spun off its remaining money-losing loyalty business in a merger with Waterloo, Ont.-based Kognitiv in exchange for a 49-per-cent stake in that company. Kognitiv has been steadily narrowing its losses but has yet to achieve profitability.

In 2021, Aimia invested $76-million in Trade X Group of Cos., which produces software for the used car industry. Aimia also swapped its holdings in AirAsia’s loyalty rewards program that year for $31-million worth of that company’s shares.

Mithaq has amassed a significant portion of its stake in Aimia very recently. While the family office holds 19.9 per cent of Aimia’s outstanding common shares, that figure was only 12.6 per cent as of Feb 1.

Over the course of its transformation, Aimia’s work force has shrunk dramatically to about 20 people as of late 2020 from roughly 450. In its most recent quarter, Aimia reported a net loss of $23.3-million, which was roughly 60-per-cent wider than the $14.6-million loss the company reported during the same period a year earlier.