In Whopping $345 Million Deal, Air Canada Will Buy Back Aeroplan

Aug 21, 2018

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The back-and-forth between Air Canada and Aeroplan has finally come to an end. On Tuesday, a consortium led by Air Canada reached an agreement in principle for the acquisition of the mileage program.

Officially, Air Canada, TD, CIBC, Visa and Aimia reached an agreement for the acquisition of one of Aimia’s loyalty programs, Aeroplan, for CAD450 million (~$345 million) in cash and the assumption of approximately CAD1.9 billion ($~1.4 billion) of Aeroplan Miles liability. That $345 million price is a large increase compared to the previous offer of $250 million that Aeroplan had rejected.

The deal was unanimously approved by Aimia’s board of directors, as well as the Mittleman Brothers investment firm, Aimia’s largest shareholders. While the groups have reached agreement in principle, the deal still needs to meet regulatory approval, as well as approval from Aimia shareholders.

“We are pleased to see that an agreement in principle has been reached as Aeroplan members can continue to earn and redeem with confidence,” said Calin Rovinescu, president and CEO of Air Canada. “This transaction, if completed, should produce the best outcome for all stakeholders, including Aeroplan Members, as it would allow for a smooth transition to Air Canada’s new loyalty program launching in 2020, safeguarding their miles and providing convenience and value for millions of Canadians.”

If the deal does go through, it does seem as though Air Canada still intends to launch its own loyalty program in 2020. At this point, it remains unclear just how the Aeroplan buyout will affect what that program will look like when it launches. In July, an Air Canada representative told TPG‘s JT Genter that if a deal were to go through, points would transfer from Aeroplan to Air Canada’s new program at a 1:1 ratio.

This deal has been a long time coming, with many twists and turns along the way. In May 2017, Air Canada formally announced that it would be ending its partnership with its long-known loyalty program partner Aeroplan in 2020 in favor of launching its own in-house program. However, since that date, things didn’t go exactly as planned for Air Canada. In April 2018, Aeroplan detailed plans for its program after 2020 when its marriage with Air Canada would be done, including the idea that members would be allowed to redeem miles for a wider selection of airlines and products.

Aeroplan released a promotional video laying out its plans for 2020.
Aimia released a promotional video laying out its plans for Aeroplan starting in 2020.

Then, in July 2018, Aeroplan provided more details about its soon-to-be launched program, including that it would be adding transfer partners to nearly 20 frequent-flyer programs. In addition, it unveiled mileage redemption levels, which turned out to be on a par with what Aeroplan currently offers with its Air Canada partnership. Just five days after unveiling those plans, Air Canada made a surprising announcement — its intention to buy Aeroplan for CAD250 million ($191 million). As it would turn out, Aeroplan rejected Air Canada’s proposed buyout — even after the offer was raised to CAD325 million ($250 million).

Tuesday’s deal shows that the hold off worked for Aimia’s Aeroplan, as Air Canada eventually dished out nearly double its original offer. While specifics remain unclear, this likely does mean good news for consumers. With Air Canada locking up the Aeroplan program, including the assumption of approximately CAD1.9 billion in liability on paper, it’ll allow Air Canada to take control over transferring miles between the two programs. It also provides continuity for Aeroplan members, as their miles will remain tied to Air Canada when the deal is completed.

While shareholders of Aimia still have to vote on and approve the deal, the company’s largest shareholder, Mittleman Brothers, LLC, has already supported the deal with Tuesday’s announcement. The deal is expected to close this fall.

Featured photo by Joel Saget / Getty Images.

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