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Report on Business Top shareholder fires back at Aimia in board battle following Aeroplan’s sale

Aimia Inc.’s largest shareholder is firing back at the loyalty-rewards company after two new directors were appointed, setting up a public clash between the New York-based fund and the company’s leadership.

Mittleman Brothers LLC, which owns 23 per cent of the company, denounced the secrecy around the appointments and accused Aimia of backtracking on its promise to shrink the board’s size.

“Mittleman’s nominee to the board – Phil Mittleman – was only given notice of the proposed appointments on Sunday, mere hours before the board meeting early Monday morning at which these two nominees were appointed,” the fund said in a statement.

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The fund also noted that in May, one month before Aimia’s annual general meeting, the company said it was slashing the size of the board to six directors, down from nine a year prior, in order to “right-size and realign the board of directors with the company’s strategic direction.”

Mittleman said it is hard to reconcile that goal with the recent appointments, which increased the board size to eight directors. "Given its recent actions, Aimia’s board – including its two new appointees – should not assume support from Mittleman.”

The public fight has erupted nearly one year after Aimia agreed to sell its crown jewel, the Aeroplan loyalty program, to a group led by Air Canada.

It also follows a contentious annual meeting in June, which was followed by allegations that the chairman shut down questions from unhappy investors. Shareholders voted in large numbers against the board. Three of the six director nominees received less than 63 per cent of the shares voted. That’s a low number for a board election in corporate Canada, where directors often receive more than 90-per-cent support.

On Monday, less than three weeks after that vote, Aimia announced it was adding two new directors, Dieter Jentsch and Fred Mifflin, bringing the board to eight. Annual meetings are the formal venues for electing directors, and it is rare to make appointments so soon after one.

A major source of tension between Mittleman and Aimia is the question of how the company should proceed now that it has sold its major asset and has more than $475-million in cash and short-term investments on the balance sheet. Chris Mittleman said in a television interview last week that Aimia should pursue acquisitions outside of the loyalty-rewards market – a strategy that conflicts with management’s current plans.

He said the fund only supported a number of the directors nominated at Aimia’s annual meeting in June because it was bound by a standstill agreement signed in 2018, when Mittleman became Aimia’s biggest shareholder. That agreement expired July 1 and Mr. Mittleman said the firm is putting together its own slate of directors to be nominated to the board.

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The escalating fight also points to a rift between the investment firm and Aimia’s chief executive officer, Jeremy Rabe, even though the fund pushed for Mr. Rabe to be hired in May, 2018.

At the time, Air Canada had decided to pull out as Aeroplan’s lead partner, and Aimia was in distress. Mr. Rabe has a career in the loyalty-rewards industry, and Mittleman hoped he could turn Aeroplan around. Air Canada later had a change of heart and made a bid for Aeroplan in July of 2018, which succeeded.

Aimia has been in limbo for almost a full year since agreeing to sell Aeroplan to Air Canada last August for $516-million. The sale closed in December, but Aimia has made little progress in articulating a strategy for life after Aeroplan, which used to contribute about 80 per cent of its operating earnings.

Aimia shares climbed slightly to $3.99 early Tuesday, but remain down more than 50 per cent from the day before Air Canada announced in 2017 that it was pulling out as Aeroplan’s lead partner.

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