Aimia fields a New Offer

  Above is one of Bombardier's new CRJ-1000s.And they have become more popular recently and so has Aimia'sAeroplan loyalty program.It got an original offer from Mittleman Brothers but that does not cover the redemption obligations of Aeroplan.The new offer is from Air Canada and several of Aimia's banking partners.The value is for the cost of it's obligations plus $250 million; in total the value would be $2.25 billion.RBC has come out recently stating that Aimia should take this offer so that it can cover all of it's Aeroplan  obligations.This blog prefers an amended deal.
      The Success of Aeroplan
          Aimia has worked on the success of Aeroplan for a long time.For many years many investors thought that the only equity Aimia had was in it's Aeroplan program.And now Air Canada and it's partners want it's main program for $250 million equity and covering it's costs.In fact, one of the main problems that Aimia had is that Aeroplan was so successful that it did not need partners.No one has equity in Aeroplan but Aimia.TD and CIBC and VISA have equity in the credit card program but not in Aeroplan.The saving of the plan can be done by ensuring that Air Canada has some equity in Aeroplan.A 25 to 50% share taken by Air Canada would ensure that both partners would be working for the future success of the program.Now a $250 million payment would be greeted popularly by Aimia investors.This blog would not take a position on the equity to be acquired by Air Canada but 25% might be low and 50% might be high.Because this would save the credit card program TD and CIBC and Visa should not be too unhappy.
                   The Future of a New Improved Aeroplan
    Aeroplan was launched in 1984 and became a full subsidiary of Aimia in 2005.It generated enough income several years ago so that the stock traded at $25.And now it has 5 million customers.                             Aimia was working on improvements before the Air Canada offer.Air Canada air  miles will be able to be switched with other carriers and perhaps  have a better rewards program.More improvements will likely be coming so that the value of Air Canada's investment will increase in the future.In fact, Air Canada should insist on improvements and an increase in total customers once it has equity in the plan.Both parties would like to see Aeroplan generating enough income to raise Aimia to a fraction of it's old peak of $25 a share.And this blog suggests that the new Aimia Aeroplan contain all the customers presently in the Air Canada Aeroplan program.
                   The Exact Value
  It is clear that Aimia made a mistake by not having Air Canada have any equity at all in Aeroplan.It is also clear that Air Canada (and it's partners) now expect to get a bargain.That is why the best deal for Aimia is to have Air Canada buy some equity now and not risk that the obligations will be redeemed  in July 2020 or only partly redeemed.Primarily some kind of deal must be made to prevent any substantial redemptions but should Aimia have to lose all of it's equity earned since 2005 to do this?An initial investment now (byAugust 2)could be arranged and an agreement to review a further investment in 5 years at a new value.This would almost eliminate redemptions for a 5 year period and delay the exact valuation of Aeroplan until 2025.After all the unilateral non-renewal of a 15 year contract (July 2020) when there are no performance issues is at the least unethical and at the most illegal.             

  www.brookfield assetmanagement.com; www.canadapensionplan.com