Author Topic: AIM.TO - Aimia  (Read 151581 times)

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #530 on: September 11, 2019, 05:26:55 AM »
Cardlytics goes ahead with a seasoned offering which includes selling shareholders (but not Aimia). It's priced at 34$ and gross proceeds of 51M are expected. At the end of Q2, their net debt was -6.0M.
https://seekingalpha.com/pr/17628300-cardlytics-announces-pricing-public-offering-common-stock

The Mittleman team lines up its defense with a counterclaim and all. While exercising control or direction on 23.5% of shares, they seem to have relatively little influence on the evolving picture. I think it's time these guys come to terms over a beer.
https://finance.yahoo.com/news/mittleman-brothers-file-statement-defence-193200946.html


movys

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Re: AIM.TO - Aimia
« Reply #531 on: September 11, 2019, 09:26:00 AM »
anybody know if the complaints are public?

i don't put much stock in Mittleman's demands for CAD125M, though i'm curious about how they are arriving at that figure.  don't love the idea of Mittleman extracting compensatory damages from Aimia's coffers while the rest of us watch the share price fall...

"It is extremely disappointing that Aimia's board of directors (the "Board") has chosen to waste corporate assets through a campaign of litigation and entrenchment, rather than undertake meaningful engagement with its largest shareholder," said Chris Mittleman, Chief Investment Officer of Mittleman.

sound like Mittleman is open to a deal.

am also surprised we haven't yet heard from the Frischer group.  they are in touch with Mittleman so if Mittleman is making progress with mgmt I imagine they could keep Frischer at bay for the time being.


Cigarbutt

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Re: AIM.TO - Aimia
« Reply #533 on: September 12, 2019, 06:28:16 PM »
nothing stops this train...

https://finance.yahoo.com/news/aimia-shareholders-accountability-requisition-special-151626620.html

https://finance.yahoo.com/news/aimia-acknowledges-receipt-requisition-shareholder-181600146.html
The following excerpt from the 'acknowledgement' was interesting:
"Further, out of concern that the early warning reporting and takeover bid requirements under applicable securities laws, regulations and rules may not have been complied with, to the potential detriment of Aimia shareholders, Aimia sent a letter earlier this week to the members of the Frischer Group, Mittleman and certain other shareholders requesting particulars of any and all coordination activities, contacts and communications among such persons.  The company intends to take any and all appropriate action in the event any or all such persons have not fully complied with the regulatory regime." (my bold)

I guess they're 'concerned' about being ejected also and the comments lately suggest the possibility of take-over bid tactics (hostility vs defense).

Also, the Cardlytics offering may close as early as tomorrow and the underwriters are paying 32.30 per share. Let's see if Aimia can do better.

Homestead31

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Re: AIM.TO - Aimia
« Reply #534 on: October 02, 2019, 04:39:44 PM »
Special meeting called with a record date of Dec 23rd, and vote to be January 24th. 

There has obviously been some debate about what the NAV is here.  From my perspective, regardless if you think Mittleman's estimate is right or wrong, I think think this is a buy because regardless of what YOU think, MITTLEMAN thinks the NAV is ~100+% higher than the share price, and if you go back through his letters and interviews you can get real real comfortable with the idea that he is going to shrink that gap when they win.

Cigarbutt

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Re: AIM.TO - Aimia
« Reply #535 on: October 02, 2019, 08:39:44 PM »
Special meeting called with a record date of Dec 23rd, and vote to be January 24th. 

There has obviously been some debate about what the NAV is here.  From my perspective, regardless if you think Mittleman's estimate is right or wrong, I think think this is a buy because regardless of what YOU think, MITTLEMAN thinks the NAV is ~100+% higher than the share price, and if you go back through his letters and interviews you can get real real comfortable with the idea that he is going to shrink that gap when they win.
It's not clear, in my perspective, how the Mittleman team will shrink the gap.

Thanks to James23 on the stockhouse Board, there is one more input relevant to the valuation of the PLM stake. The playbook to repatriate parts of loyalty units shared previously has been refined by Air Canada and recently, in Brazil, Multiplus has been privatized (contract due for renewal in 2024) and Smiles is pursued by their parent in a similar way (contract expires in 2032). With this playbook, the typical 8-10x EBITDA multiple has been trimmed by 30 to 60% due to the essential role played by the airline anchor partner. James23 refers to recent events related to Velocity (2nd largest loyalty program in Australia, behind Qantas loyalty). Long story short: Virgin Australia has had a loyalty unit for a long time and sold 35% of it to Hong Kong-based Affinity group for 336M (AUD) at the end of 2014. The price paid was 12x EBITDA and about 210 AUD per member. Affinity had an exit plan in mind and held convertible notes. Recently, Affinity came up with the idea that it was time to sell their stake and they used the public offering threat. Even if Virgin Australia has a relatively weak balance sheet, they announced (deal should close by the end of 2019) that they will buy back the 34.82% interest for 700M (AUD), which corresponds to a 14-15x EBITDA multiple and about 200 AUD per member. It seems that they will issue shares and get access to cheap debt capital.

This may constitute an interesting input for the PLM stake. Since 2013-4, PLM has grown similarly to Velocity (revenue, EBITDA, number of members). In the last 12 months, PLM has reported an adjusted EBITDA of 83M (USD). The disclosure for Velocity accounting is relatively muted and they seem to recognize a part of revenue (marketing) earlier than PLM, whose accounting seems to be derived from the Aeroplan playbook but, from a cash flow point of view, both entities appear comparable. A point could be made that PLM distributes a relatively large amount of its cash flows. However, Affinity has received in distributions 174.1M (AUD) since 2015.

Perhaps contractual arrangements and the shareholders' agreement are different between Aimia and Aeromexico but the Velocity story shows that the game can be played differently.
https://www.asx.com.au/asxpdf/20190916/pdf/448jw0nlpy3mzh.pdf
https://loyaltylobby.com/2019/09/16/virgin-australia-buys-back-velocity-program-for-700-million-double-the-former-sales-price/

Homestead31

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Re: AIM.TO - Aimia
« Reply #536 on: October 03, 2019, 05:17:09 AM »
side note, related to the Virgin Australian transaction.... in the past people have commented that AeroMexico doesn't have the balance sheet to pay a fair price.  I think that is not the right way to pay for it. 

Virgin Australia doesnt have a great balance sheet.

But that misses  the point that its not really the airline that pays for these things, it is the card issuers and banks.

Concurrent to Air Canada giving Aimia ~$500M for Aeroplan, "Toronto-Dominion Bank and Canadian Imperial Bank of Commerce paid Air Canada about $822 million, on top of an undisclosed payment from Visa Canada Corp. TD and CIBC also made pre-payments of $400 million in total to the Aeroplan -- now Air Canada's subsidiary -- to be applied to future monthly payments "in respect of Aeroplan Miles," Air Canada said."  source:https://www.bnnbloomberg.ca/aimia-completes-sale-of-aeroplan-loyalty-program-to-air-canada-repays-debt-

I assume something similar will happen with Virgin Australia, and that something similar could happen with AeroMexico


movys

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Re: AIM.TO - Aimia
« Reply #537 on: October 10, 2019, 11:42:44 AM »
I find the stock action (or lack thereof) since the announcement of the special meeting incredibly interesting.  This is THE catalyst that the skeptics and long-suffering shareholders have been waiting for -- the chance to reconstitute the board.  Why does no one care?

I'm left to conclude that either A) the market thinks mgmt will win the vote or B) closing the gap to NAV is not possible even for sophisticated and thoughtful capital allocators.

Does mgmt have an ace up their sleeve I'm not aware of?  Are they able to prevent Mittleman from voting given the ongoing litigation between them?  Are there actually shareholders out there who want mgmt to stay in place??

My guess is there are more people concerned about conclusion B, and while monetizing PLM may not be a slam dunk, there are certainly many other levers a reconstituted board can easily pull to crystallize an incremental $1.50/share in value.

wabuffo

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Re: AIM.TO - Aimia
« Reply #538 on: October 14, 2019, 07:26:29 AM »
Virgin Australia has had a loyalty unit for a long time and sold 35% of it to Hong Kong-based Affinity group ... they will buy back the 34.82% interest for 700M (AUD), which corresponds to a 14-15x EBITDA multiple and about 200 AUD per member.

In the last 12 months, PLM has reported an adjusted EBITDA of 83M (USD)... from a cash flow point of view, both entities appear comparable.

I took a look at this transaction and dug out some financials for Velocity from Virgin Australia's annual report disclosures.  While both businesses are frequent flyer loyalty business, it looks to me that the Virgin/Velocity business generates higher free cash flow profit margins and this can be seen from its cash generation.  In addition, the current assets reflect what looks like a sizeable cash asset that I think forces one to reduce the headline price paid for the business.  Bottom line I think this transaction equates to a $650m USD value for PLM - which puts AIM's stake at around $320m USD.  That's higher than I had in my model - but probably would be a disappointment for the activists.

Here's my model - please feel free to comment, criticize.  There's some assumptions here simply because the published financials aren't detailed enough - its sensitive to one's estimate of cash flows and the cash flow numbers from both entities require a few assumptions that could be wrong.

wabuffo


Homestead31

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Re: AIM.TO - Aimia
« Reply #539 on: October 14, 2019, 07:57:14 AM »
not sure i would agree with using the same multiple applied to 3 year average FCF when Virgin Austrlia grew revenue 10% over 3 years and PLM grew revenue at 50% over 3 years.  In fact, i would say that is entirely inappropriate, especially given the operating leverage in the business. 

In fact, given that FCF at Virgin Austrlia has declined by 17% over the last 3 years, one could argue that the 9.4x multiple is low, and that since FCF at PLM has grown 450% over the last 3 years PLM deserves a premium.  If not a premium at the very least the 9.4x multiple should not be applied to a 3 year average that has inflected so massively.  I would note that 9.4x 2018 FCF implies a value north of $1B. Now maybe FCF comes down a bit given the economic situation at Mexico, but even if you ding them for that, i think your model is way off.  Remember, the numbers by themselves mean nothing.  you have to think about what they mean, and it should be obvious that 50% top line growth and 450% FCF growth is better than 10% top line growth and shrinking FCF.