Air Canada needs to materially raise purchase price for Aeroplan, says analyst

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A faction led by Air Canada needs to “materially raise” its $250 million cash proposal to purchase the Aeroplan loyalty program, an industry analyst said Monday.

Feelings differ between the two sides on the $2 billion Aeroplan liability that Air Canada pass on absorb through its offer.

“Regardless, the consortium’s offer isn’t enough,” Adam Flare of National Bank Financial wrote in a report.

He said it needs to enhancement given the expenses such as accrued preferred dividends, last avowed but unpaid common dividend, working capital, pension liability and severance to cage in operations.

Aimia’s shares have surged to $3.47 since the hinterlands’s largest carrier made an offer that included cash and acceptance of the stability program’s liability for miles issued. 

However, they are still through below the $8.93 they traded at before Air Canada announced rearmost May that it wouldn’t renew its 30-year exclusive partnership in 2020.

Airline CEO Calin Rovinescu terminating Friday described the offer as “extremely generous,” adding the consortium which embraces TD, CIBC and Visa is likely the only buyer willing to take on the obligation.

“Some of this is negotiating in public and talking at key Aimia shareholders that prepare visions of far greater value for Aimia’s assets than anything others may be enthusiastic to pay,” Shine wrote ahead of Air Canada’s Thursday deadline.

“We don’t think Aimia force completely reject the consortium’s proposal, but how much more cash it may worm out is difficult to assess.”

Rovinescu’s comments suggest that a doubling or tripling of the readies offer isn’t likely to materialize but could be increased by $100 million to $150 million, he broke.

More money

Chris Murray of AltaCorp Capital also remembers Air Canada will pony up some more money to ensure a persuasive transition for its customers who use Aeroplan and ensure its value is maintained.

“I would not be surprised to see a to a certain increased bid but I don’t think it’s going to be material,” he said in an interview.

Air Canada made Aeroplan as in-house loyalty program but it was spun off as an independent business as side of a court-supervised restructuring of the airline at the time, CIBC was Aeroplan’s main bank comrade.

Since 2014, TD has been Aeroplan’s main Visa card fellow-dancer although CIBC continues to offer Aeroplan cards rewards intentions that can be redeemed for Air Canada flights and other merchandise.

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