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Mittleman Brothers LLC Responds to Actions by Board of Aimia Inc. to Entrench Themselves


NEW YORK, July 23, 2019 /PRNewswire/ -- Mittleman Brothers LLC ("Mittleman" or "we" or "our"), a value-oriented investment firm which through subsidiaries and with affiliates is the largest shareholder of Aimia Inc. (TSX:AIM) ("Aimia" or the "Company") owning or exercising control over approximately 23.2% of its outstanding shares, today commented on the recent action by Aimia's board (the "Board") to entrench themselves.

On July 22, 2019, Aimia commenced legal action (the "Entrenchment Action") against Mittleman to, among other things, enjoin Mittleman from taking any steps to remove or replace the directors of Aimia that were elected at its June 28, 2019 annual general meeting (the "AGM").  If successful, the effect of the Entrenchment Action would be to entrench, for the foreseeable future, a Board comprised of directors:

  • who presided over the loss of approximately C$844 million in market value from December 1, 2016, when current Chair William (Bill) McEwan and director Thomas D. Gardner both joined the Board, through July 22, 2019, representing a negative total return of -46.64% compared to an 18.9% total return by the S&P/TSX Composite Index over that time frame;
  • who have de minimis-to-no personal investment in the Company's shares and whose economic interests are not aligned with shareholders;
  • five of whom would not have received majority support at Aimia's June 28, 2019 annual general meeting (the "AGM") without the standstill-compelled support of Mittleman (receiving only 27%-44% support at the AGM in the absence of compelled votes from Mittleman); and
  • two of whom were not even elected by shareholders at the AGM, but were instead appointed only 17 days after the AGM without the unanimous consent of the Board and without any consultation with the Company's largest shareholder.  Mittleman's nominee on the Board, Phil Mittleman, was given less than one day's notification over a weekend to consider these directors' qualifications.

The ability of shareholders to vote and remove underperforming directors is a fundamental corporate right under Canadian law, and the attempt by the current Board to disenfranchise the Company's largest shareholder of its right to vote on specious legal grounds represents a transparent attempt to entrench themselves and hold themselves above and unaccountable to shareholders.  The Board's self-serving actions are a disturbing breach of basic principles of shareholder democracy and corporate governance which should concern all shareholders.

The allegations against Mittleman in the Entrenchment Action are false and baseless and Mittleman will vigorously defend itself and hold the directors of the Company personally accountable for their actions.

Tellingly, the Company threatened legal action against Mittleman only three days after the Board had been re-elected with Mittleman's support at the AGM and the day after a standstill agreement committing Mittleman to vote in support of Aimia's director nominees had expired.  The clear intent and timing of the threatened legal action was to silence Aimia's largest shareholder and force it to continue to support the Board, the moment Mittleman was no longer contractually obligated to do so.  Shortly following the AGM, on July 8, 2019, a group of concerned shareholders publicly criticized the Company and its Chair, William (Bill) McEwan, for irregularities at the AGM in violation of the by-laws of the Corporation and Canadian corporate law and called for a new meeting of shareholders.  Fearing that a new meeting would soon be requisitioned, the Company initiated the Entrenchment Action to avoid being voted out of office by shareholders.  Notwithstanding the Entrenchment Action and the Board's other threats, Mittleman takes shareholder democracy and its role as a major investor in Aimia seriously.  Mittleman has no intention of ceasing to hold the Board accountable for its performance and governance track record at any future meeting. 

As Aimia's largest shareholder, with an over 23% stake, Mittleman's interests are fully aligned with the Company's.  Accordingly, Mittleman's agenda is simply to protect, preserve and enhance value for all shareholders.  Mittleman has been a hugely beneficial ally for Aimia and a significant creator of value for Aimia's shareholders since first engaging with the Board in March 2018, as we and our board nominee, Phil Mittleman, intervened to prevent a fire-sale of Aimia's major remaining assets.  Without this intervention, the Company's Special Committee, Board and management would have accepted Air Canada's initial offer for Aeroplan from July 2018 of C$250 million (subject to further reduction by the proposed adjustment terms), rather than the C$516 million in proceeds for Aeroplan which was ultimately realized. 

Mittleman is not a "hedge fund" as Aimia's Board has incorrectly claimed and the vast majority of our assets under management reside in separately managed accounts.  It would be logistically impossible for an investment manager structured as we are to buy-out any public company in its entirety at any price – as the Board has erroneously claimed is Mittleman's agenda.  Furthermore, any takeover of Aimia would entail a change of control that would likely destroy the value of its more than C$600 million in tax loss carryforwards in Canada, the U.S., and the U.K.  Shareholders should dismiss the Board's scurrilous talk of secret agendas and plots to take over the Company as empty and self-serving fearmongering.   

The actions by Mittleman, to which Aimia's board has objected have been its advocacy for improvements in governance more commensurate with the change in the Company's business profile post-Aeroplan and proposals in support of acquisitions and investments which we believe would have been accretive to Aimia's free cash flow and intrinsic value per share, diversified its business risk away from loyalty solutions where it has fared very poorly, and would have utilized Aimia's large tax-losses in the U.S., promoted more efficient capital allocation (including share repurchases) and more aggressive cost cutting – all of which would benefit shareholders broadly.  None of these actions are unlawful or a breach of any agreement.  They are simply good business, which the Board has largely chosen to ignore.    

The claim that Mittleman somehow initiated a "withhold vote" campaign against the Board at its 2019 AGM is similarly without any factual basis, as Mittleman voted our shares at the AGM in favor of all of the Company's director nominees in accordance with a standstill agreement.  Indeed, without our vote, only Phil Mittleman would have been elected to the Board at the 2019 AGM. 

We further note that the 2019 AGM was the second year in a row in which a significant number of votes were withheld from these directors (approximately 32% of votes were withheld from each of Robert (Chris) Kreider, William (Bill) McEwan and Thomas D. Gardner at the 2018 AGM and they would not have been elected at that meeting without Mittleman's compelled support) and yet there is no allegation of a "withhold vote" campaign by Mittleman in 2018.   Rather than blame Mittleman for the Board's underwhelming levels of shareholder support over the past two years, the Board should instead examine its own performance and the significant loss of shareholder value which has occurred under its watch.  The Board should also ask itself why Phil Mittleman was the only director to receive over 90% support at both of Aimia's last two AGMs.

An Unnecessary Diversion from Pressing Issues at PLM

Shareholders should be concerned that the Board is unnecessarily diverting the Company's cash resources from operations and potential investments to a frivolous and vexatious lawsuit to counter legitimate shareholder concerns, protecting no stakeholder except for the Board and CEO.  They should be doubly concerned that the Board is diverting its attention at a time when the Company's relationship with its principal business partner in the travel loyalty space appears to be disintegrating – for the second time in little over two years. 

Indeed, the Entrenchment Action would appear, in part, to represent an effort to silence Mittleman's and its board nominee, Phil Mittleman's, recent concerns about worrying disclosure practices by Aimia.  Both have questioned Aimia's failure to promptly and publicly disclose in May 2019 that PLM Premier, S.A.P.I. de C.V. ("PLM") removed its CEO, Francisco Schnaas, and appointed an interim CEO – notwithstanding that the Company was engaged in a substantial issuer bid to repurchase for cancellation up to C$150 million of its common shares at that time.  PLM is the owner and operator of Grupo Aeroméxico S.A.B. de C.V. ("Grupo Aeroméxico")'s "Club Premier" frequent flyer program.  Aimia's 48.55% interest in PLM is its largest investment and is material to the Company.

The importance of the CEO's termination was highlighted when, on July 16, 2019, Grupo Aeroméxico disclosed that, "following the recent removal of the Chief Executive Officer [of PLM] … Grupo Aeroméxico has written to Aimia … and placed Aimia on notice regarding what Grupo Aeroméxico believes have been irregularities and potential breaches of the relevant contractual arrangements governing PLM … Grupo Aeroméxico has also advised Aimia that, given recent events, Grupo Aeroméxico is re-evaluating all aspects of its customer loyalty strategy with a view, wherever possible in compliance with the relevant contractual arrangements, to minimizing reliance on PLM Premier going forward and ensuring a seamless transition away from PLM Premier as soon as possible …".  The public was not notified of Grupo Aeroméxico's notice to Aimia until after Grupo Aeroméxico's earnings release on July 16, 2019.

"For the past year and a half, Mittleman has been prepared to work with Aimia's Board to create value for shareholders – as we did in connection with the sale of Aeroplan.  Unfortunately, the Board has failed to consult with us, broken its agreements with us and excluded our board nominee from critical meetings, decisions and information concerning the business, operations and strategy of Aimia as well as from access to accounting books and records.  And it's not just Mittleman that this Board has been unable to work with.  This is a Board which regrettably also has been at odds with Aimia's former major business partner (Air Canada), its current major business partner (Grupo Aeroméxico), its former president and another group of concerned shareholders," said Christopher P. Mittleman, Chief Investment Officer of Mittleman.  "None of these disputes have created value for the business or its ultimate owners – the shareholders.  It's time for a Board at Aimia which can work co-operatively with its business partners and investors."

Mittleman remains committed to assisting the Company in improving the value of Aimia for all stakeholders, and we believe that entails, first and foremost, a Board with seasoned, independent, investment and business professionals, experienced in operations and in M&A not only as agents but as principals putting capital at risk with discernible multi-decade track records of success. Board members should be willing to commit personal capital through significant insider share ownership, which we believe is critical for alignment between directors and shareholders.  Proven leaders with an ownership mentality that will be instilled throughout the organization are urgently needed for Aimia right now, and shareholders deserve nothing less.

While Aimia's legacy is in loyalty and Aimia continues to have attractive minority interests in loyalty assets, we believe Aimia's future strategy cannot be limited to loyalty alone; given Aimia's currently unprofitable wholly-owned loyalty solutions operating division, the limited number of attractive assets within the loyalty sector, high acquisition multiples and minimal synergies. Instead we believe that Aimia will have to broaden the scope of its strategy beyond only loyalty, to acquire free cash flow generating operating businesses and take advantage of Aimia's more than C$600 million in tax-loss assets in Canada, the U.S., and the U.K., which would otherwise be squandered in a liquidation, break-up, or sale of the entire Company. 

Mittleman believes that Aimia, with the proper oversight, is uniquely positioned to deploy its liquid assets, leverage its debt free balance sheet, and legacy tax losses into accretive acquisitions of operating businesses, and we intend to strongly support efforts to achieve this. 

About Mittleman Brothers LLC:

Mittleman Brothers LLC is a holding company which wholly owns Mittleman Investment Management LLC ("MIM"), an SEC-registered investment adviser that provides discretionary portfolio management to institutional investors and high-net-worth individuals. MIM pursues superior returns through long-term investments in what it deems to be extremely undervalued securities, while maintaining its focus on limiting risk.

Mittleman was ranked #1 out of 404 composites/funds in the Broadridge/Lipper International Equity category for the 10 years ended 03/31/2019 (the most recent report available):

As of the date hereof, MIM exercised control or direction over 27,284,466 common shares of Aimia Inc. ("Common Shares") on behalf of accounts over which MIM exercises control or direction through its discretionary investment authority (the "Accounts"). This represents approximately 23.2 % of the issued and outstanding Common Shares disclosed by Aimia.  Included in the security holdings of the Accounts are 12,500 Common Shares beneficially owned by Mittleman Brothers LLC ("MB"), an affiliate and joint actor of MIM.

In addition, 359,847 Common Shares are beneficially owned by MIM's officers and employees. 

About Aimia:

Aimia Inc. (TSX:AIM) is a loyalty and travel consolidator focused on growing earnings through its existing investments and the targeted deployment of capital in loyalty solutions and other sub-sectors of the loyalty and travel markets.

Aimia's investments in travel loyalty include the Club Premier program in Mexico, which it jointly controls with Grupo Aeroméxico through its investment in PLM, and an investment alongside Air Asia in travel technology company BIGLIFE, the operator of BIG Loyalty.

Aimia also operates a loyalty solutions business, which is a provider of next-generation loyalty solutions for many brands in the retail, CPG, travel & hospitality, and financial services verticals.

For more information about Aimia, visit

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