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Nov 18, 2019

Aimia to overhaul board in deal with shareholders amid uncertain future

CEO Jeremy Rabe needs to go: Aimia shareholder Charles Frischer

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MONTREAL -- Aimia Inc. has reached a deal with a group of dissident shareholders to overhaul its board of directors, ending a drawn-out fight over control of the company.

The agreement also includes a plan by the company to buy back up to $125 million worth of Aimia's shares by Dec. 30.

The deal marks a partial surrender to the group led by Charles Frischer, who had sought to overthrow half of Aimia's eight-member board, and to Philip Mittleman, the company's largest shareholder who was locked in a court battle with Aimia.

The loyalty company sold its flagship Aeroplan program to Air Canada earlier this year. The deal left Aimia with significant cash on hand, but also questions about its future amid months of turmoil over its leadership.

All of the company's directors excluding Mittleman and chief executive Jeremy Rabe have confirmed they will not stand for election to the board at the company's 2020 annual meeting, to be held before May.

The shareholder agreement will see three out of four replacements that Frischer had put forward -- including himself -- nominated as directors no later than Feb. 28. In exchange, the dissident investors have withdrawn their request for a special meeting of shareholders.

"I think it's a fair compromise for all parties," Frischer said in a phone interview. "I think it's a bright day for Aimia today."

Mittleman, whose Mittleman Brothers LLC owns 23.1 per cent of common shares, will nominate two directors, one of whom will be Frischer.

Aimia and Mittleman Brothers have also agreed to end their court battle, which erupted after the loyalty company accused the investment firm of advocating for radical change during a "standstill agreement" and attempting to orchestrate a covert campaign to encourage other shareholders to withhold their support for Aimia's board nominees at the 2019 annual meeting.

"We're very pleased with the settlement and believe this outcome will benefit all stakeholders," Mittleman said.

Frischer expressed mild support for the CEO who he wanted off the board just two months ago.

"I think everybody thought this would be a good transition. That's what we all agreed to," Frischer told The Canadian Press. "As part of the settlement, Jeremy (Rabe) will continue to be the CEO."

Chairman Bill McEwan -- who will also step down -- said in a statement that the settlement will "advance the interests of the company and its stakeholders, while allowing the company to move past the existing litigation and settle the uncertainty regarding upcoming director elections."

"The board also unanimously approved an additional and significant voluntary share repurchase to provide liquidity and optionality to all our preferred and common shareholders in transactions designed to be accretive and value-enhancing," McEwan said.

Aimia has lost three-quarters of its share value over the past five years and nearly two-thirds since November 2016.

The Montreal-based company saw its two main loyalty segments lose $74.9 million in core adjusted earnings last year, resulting in a net loss of $72 million. While profits dropped by a further 22 per cent year over year last quarter, Frischer said the loyalty divisions performed better than expected.

"One quarter does not make a future, but based on the third quarter there were signs of green sprouts, and it was encouraging that a turnaround may be in place there," he said.

Analyst Drew McReynolds of RBC Dominion Securities said the deal represents a "significant potential strategic pivot for Aimia relative to the consolidation strategy that the company had embarked on following the sale of Aeroplan."

Aimia's shares rose more than eight per cent or 30 cents to close at $3.93 on the Toronto Stock Exchange.