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Jul 30, 2018

Air Canada’s Aeroplan takeover offer 'isn't enough,' analyst says

Aimia under pressure to make deal


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Air Canada and its partners will have to sweeten their takeover offer for Aeroplan if they hope to win the prize, according to National Bank Financial Analyst Adam Shine.

Air Canada, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Visa Canada Corp. stunned Bay Street last week by going public with an offer to buy Aimia Inc.'s Aeroplan division in a $2.25 billion deal. The terms of the offer include $250 million in cash, with the other $2 billion covering the loyalty plan's points liability. The group didn't leave much time for deliberations, warning the offer would only be on the table until Aug. 2.

"The consortium’s offer isn’t enough, at least not to support Aimia’s stock here," Shine wrote in a note to clients on Monday.

"We don’t think Aimia will completely reject the consortium’s proposal, but how much more cash it may extract is difficult to assess," he added.

"The message and tone from Air Canada on Friday, however, doesn’t suggest to us that a doubling or tripling of the consortium’s $250-million cash offer is likely to materialize. Some upside may indeed exist, but is it going to be restricted to around an extra $100-$150 million?"

Shine downgraded Aimia to Sector Perform from Outperform, and lowered his price target to $3.50 from $4.30. Aimia was trading at $3.47 at 12:05 p.m. ET on the Toronto Stock Exchange.

"We think it more prudent [to lower the price target and downgrade the stock] as we wait to see how this drama unfolds," he wrote.  


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