Aimia CEO says legal fight with biggest shareholder no barrier to M&A strategy

MONTREAL — The head of Aimia Inc. says its legal battle against its largest shareholder has not hampered the loyalty company’s hunt for bolt-on acquisitions as it charts a new course after the sale of its Aeroplan business.

“We continue to be focused on executing M&A strategy. We’ve seen robust deal flow since we announced the strategy. We continue to see that,” said chief executive Jeremy Rabe on a conference call with analysts, responding to a question about whether Aimia plans had “been impacted by the noise that led to the lawsuit.”

Last month the company filed a statement of claim against Mittleman Brothers LLC, which owns 23.3 per cent of Aimia shares, accusing the dissident investor of violating a contracted truce, the latest move in a battle over control of the company’s board of directors.

Aimia says Mittleman continued to push for radical change at the company throughout the truce and tried to orchestrate a covert campaign encouraging other shareholders to withhold their support for Aimia’s nominees at the 2019 annual meeting.

Those board members backed a strategy to buy up loyalty analytics firms with the windfall from the $516-million sale of Aimia’s flagship Aeroplan program to Air Canada earlier this year.

“While it’s too early to say whether any of these targets will make it through the robust capital allocation process that we’ve established, we are in active discussions with a number of potential companies,” Rabe said.

Christopher Mittleman, Mittleman Brothers’ chief investment officer, has said the legal claims are baseless and the lawsuit is “appalling in its wastefulness and reprehensible for its falsities.”

Last quarter, Aimia signed a multi-year contract to deploy its loyalty program at ISS, an Asian retailer that operates supermarkets and health and home furnishing stores. Aimia also inked consulting and analytics contracts in Australia with a spa company and a fashion retailer as well as a fashion outlet in Canada, Rabe said.

The past two years have been turbulent for the Montreal-based company.

Former CEO Rupert Duchesne stepped away from the job in January 2017, replaced first by David Johnston and then in May 2018 by Jeremy Rabe. A bitter mediation battle broke out last year between the company and former president and chief strategy officer Nathaniel Felsher, who left in November less than three months after he took the job.

A separate group of shareholders has raised objections to how the company conducted its annual meeting last month, calling unsuccessfully for it to be held again.

The group, dubbed Aimia Shareholders for Accountability, said the chairman refused to conduct votes or take questions and allowed security guards to intimidate shareholders who attempted to speak, with one being “forcibly” removed.

Rabe said Wednesday he continues to aim for core adjusted profits “during 2020.”

Analyst Drew McReynolds of RBC Dominion Securities said both revenue and adjusted core losses last quarter were worse than expected, but noted Aimia is in a “transition year.”

In its latest quarter Aimia earned $43.5 million, boosted by gains related to investments.

The company said the profit amounted to 29 cents per share for the quarter ended June 30, compared with a profit of $11.1 million or four cents per share a year ago.

Revenue from continuing operations fell to $31.0 million compared with $42.8 million in the same quarter last year.

On an operating basis, Aimia reported a loss of $21.7 million from continuing operations for the quarter compared with an operating loss of $39.5 million a year earlier.

The company had a negative free cash flow of $56 million from continuing operations, compared with negative cash flow of $28.2 million in the second quarter of 2018.

Aimia sold the Aeroplan program to Air Canada in January, leaving it with significant cash on hand but also questions about its future.

The company’s other assets include a 48.9 per cent stake in PLMA, the loyalty program for Aeromexico — which threatened to cut ties with Aimia last month — and a 20 per cent share of AirAsia’s loyalty program, Think Big.

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