Author Topic: AIM.TO - Aimia  (Read 129564 times)

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #390 on: May 15, 2019, 05:01:08 AM »
There continues to be potential closing of the mismatch between value and quoted securities along the capital structure with potential catalysts and the main risk being that the company continues to burn cash during the 'transformation'.

The Mittleman brothers' standstill agreement ends in early July and the recent bid for WestJet by Gerry Schwarz-led Onex raises the possibility that the new entity's loyalty unit may involve part or all of Aimia somehow.

For PLM valuation purposes, in 2003, Mr. Schwarz had offered a conservative offer for 35% of Aeroplan ("gem") with a 1.2x gross billings and 8x EBITDA parameters. PLM's gross billings for 2019 should be around 260M (USD) and EBITDA should be around 85M (USD). PLM is comparable to Aeroplan but differs in its growth prospects which more than compensate expected declining EBITDA margins. With a slight control premium, Aimia's stake in PLM should be worth between 350 to 450M (CDN).

Also, the Cardlytics stake has been going up in value on strong results and wonder if Mr. Mamdani will remain a passive investor.


wabuffo

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Re: AIM.TO - Aimia
« Reply #391 on: May 23, 2019, 09:04:33 AM »
https://www.aimia.com/newsroom/news-releases/

Aimia buys back a bit less than 23% of its common shares o/s at $4.30 per share.   Stock now trading at $3.73.  Oh well.

wabuffo

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #392 on: May 23, 2019, 09:59:42 AM »
I guess the value is in the eye of the beholder (to be holder?)
Mittleman Investment Management bought a significant chunk of shares at 3.85 to 3.86 yesterday.

An interesting corollary of the auction process is that a threshold is being defined for privatization.
If too much of a mouthful, the investor who holds 60% of preferred shares could participate in the acquisition in exchange for a post-acquisition dividend.

movys

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Re: AIM.TO - Aimia
« Reply #393 on: May 23, 2019, 10:34:19 AM »
The offering was oversubscribed so I think much of the selling over the past two days are from holders who were involved for the TO, got pro-rated, and are now dumping.

deseretalts

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Re: AIM.TO - Aimia
« Reply #394 on: May 23, 2019, 02:36:44 PM »
Where did you see that Mittleman was adding?

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #395 on: May 23, 2019, 03:19:45 PM »
Where did you see that Mittleman was adding?
See canadianinsider.com
I just saw that they filed today for an additional 500 000 shares bought yesterday at 2.82 (USD).
A million here, a million there, soon we may be talking real money. :)
« Last Edit: May 23, 2019, 03:22:11 PM by Cigarbutt »

samwise

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Re: AIM.TO - Aimia
« Reply #396 on: May 23, 2019, 06:01:22 PM »
Here's a slightly dated report that focuses on the common shareholder's perspective:
http://www.mittlemanbrothers.com/wp-content/uploads/2018/11/Value-Investor-Insight-Aimia-10-31-18.pdf

This link mentions C$650 million in losses which can be netted against **investment** gains. Another $150 of US NOLs.

I'm not familiar with Canadian corporate taxation, but if it's like that for individuals, that means the 650 is only for capital gains generated by buying and selling businesses or securities, not for ongoing business income. I couldn't find any confirmation in Aimia's financials. Anyone has any experience or expertise here?

If that's true then it seems like this going to be Mittleman's permanent capital vehicle. They could trade like senvest, permanently at 50% of NAV.

If they can compound the cash, they also have the option of not paying the prefs (see DTLA, possibly TOO prefs). Prefs go from being floating rate (cash at 100% of face) to a zero coupon bond ( worth say 40% of face). The prefs are cumulative but not PIK, which would make them compound. There seems to be some tax implications they mention in their latest quarterly. Is the tax still payable if they don't pay the pref dividend? Any credit experts and tax experts who can opine on this?

Biggest risk now is that they are forced to agree with some value destroying plan as they have to vote with management at the next AGM.

Next risk is they force out minorities for cheap. ( Again see TOO).

Then the risk is that they screw up the investments.(recent performance isn't great)

Finally, the market always keep them at a discount (senvest)

I think they could create value by just investing in an S&P etf and turning off the prefs. Get compounding value , but pay simple interest once at the end. Same idea as an RRSP. The more leverage you get from the prefs, the better the percentage returns for the equity.

So even more buybacks would make sense here. Extreme case AIM are investing borrowed money and none of their own. I don't think the prefs are protected from that possibility.

Management has to just stop giving money away as they just did with HSBC.

NewbieD

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Re: AIM.TO - Aimia
« Reply #397 on: May 24, 2019, 01:12:10 AM »
Here's a slightly dated report that focuses on the common shareholder's perspective:
http://www.mittlemanbrothers.com/wp-content/uploads/2018/11/Value-Investor-Insight-Aimia-10-31-18.pdf

This link mentions C$650 million in losses which can be netted against **investment** gains. Another $150 of US NOLs.


If they can compound the cash, they also have the option of not paying the prefs (see DTLA, possibly TOO prefs). Prefs go from being floating rate (cash at 100% of face) to a zero coupon bond ( worth say 40% of face).

...[]...

I think they could create value by just investing in an S&P etf and turning off the prefs. Get compounding value , but pay simple interest once at the end. Same idea as an RRSP. The more leverage you get from the prefs, the better the percentage returns for the equity.


No knowledge on the tax loss rules. On the surface this pref idea seems like a good route. That is if you don't care about screwing part of your capital structure. Do you think they'd be comfortable with this given possible long term implications to themselves raising money? What happened in the cases you mention? Guess you write about S&P as a thought experiment, don't think any activist investor would go for that:)

Regarding investments. AIM has formed an investment commitee. The plan from mgmt seems clear - to grow through M&A in the loyalty business. At least they put some profitability criteria in.

Agree that more buybacks seems sensible unless they find something truly cheap to buy. But it will make it take a long time to use the tax credits, so not sure how agressive they will go with this.

Selling the Cardlytics stake and buyback or buy something yielding profits would make sense unless they believe it's clearly undervalued.

Does Mittleman have any record of exploiting minorities?

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #398 on: May 24, 2019, 08:29:09 AM »
1-income tax paid on preferred dividends showing how present capital structure is inefficient
The idea behind Part VI.1 tax is the expectation by tax authorities that dividends are paid with after-tax profits. Since profitability for the operating entity is theoretical and future-looking, when dividends will be paid on preferred shares, tax will be paid and will be carried forward as non-capital losses for up to seven years, to be used against operating taxable income. What remains to be explained is the 40% rate. I understand that the basic rate is 25% but firms can elect for the 40% rate. Since this is equivalent to paying tax in advance, this would only make some sense if a rapid and significant return to operating profitability is achieved and even then. Using the 40% rate now only seems to make sense from the point of view of the dividend payee who is a corporation and then does not have to pay an extra 10% upon reception of the dividend. Given the present capital structure based on a large amount of preferred shares as equity, the unfavorable tax treatment and the uncertain outlook for return to operating profitability, I think the stranded status has less value for common shareholders (and the Board).

2-Mittleman Investment Management involvement and what it may mean for capital structure
There are risks that the firm somehow muddles through some kind of transition and value in the capital structure may end up dissipated or channelled. I think the Mittleman brothers will play a significant role and would say it's unlikely that they exploit minorities or the stranded scenario. Aimia will tend to look like a holding of investments and, from a humble perspective, the preferred share prominent position in the equity would be very unusual (and tax inefficient, see above) for such a vehicle. The performance at the investment management firm has been relatively poor in the last few years but they are basically patient contrarian value guys who typically try to make money from intrinsic value discrepancies. They have not so far been involved in controlling stakes with implied control premiums but Aimia is a different story. I would say that the Mittleman people have been too optimistic with Aimia but their appraisal is still well above where the market is marking the value at this point. In the past, thay have been involved on the minority side and, for instance, have voiced concerns about the potential predatory behavior of Ron Perelman with Revlon. Unlike the DTLA and the TOO scenarios where actors would actually take advantage of situations thay have contributed in creating, I think the Mittleman firm is likely to play the game fairly to promote value realization.

I guess we'll just have to see and the next few weeks may provide some answers.

samwise

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Re: AIM.TO - Aimia
« Reply #399 on: May 24, 2019, 09:03:24 PM »

No knowledge on the tax loss rules. On the surface this pref idea seems like a good route. That is if you don't care about screwing part of your capital structure. Do you think they'd be comfortable with this given possible long term implications to themselves raising money? What happened in the cases you mention? Guess you write about S&P as a thought experiment, don't think any activist investor would go for that:)
.

Does Mittleman have any record of exploiting minorities?

I am not sure if Mittleman has ever had the opportunity or temptation to exploit minority shareholders or separate layers of capital structure. I do know it would weaken their moral position against Perelman in Revlon ( rhetorical question: is the moral high ground a good defence against a shark?).

Long term implications for BAM have been nil, AFAIK. They sell returns to their LPs not manners.

I don't expect them to buy ETFs, but it would eliminate stock selection risks from the evaluation. Seems a safer option than more Revlon and AMC.