Air Canada inks deal to buy Aeroplan rewards program for $450M

Click to play video: 'Air Canada buys back Aeroplan' Air Canada buys back Aeroplan
WATCH ABOVE: After a year of uncertainty for Aeroplan, Air Canada set to buy loyalty program – Aug 21, 2018

MONTREAL – Air Canada has signed a definitive agreement to buy the Aeroplan loyalty program from Aimia Inc. for $450 million in cash.

READ MORE: Air Canada to buy Aeroplan: 8 things consumers should know

Under the deal, Air Canada will also assume $1.9 billion of Aeroplan miles liability. The definitive agreement follows an announcement in August of a tentative sale.

Air Canada said it has also signed agreements with TD Bank, CIBC and Visa that will see them stay on with the Aeroplan loyalty program.

Under its deal, TD will pay Air Canada $622 million plus an additional $308 million that will be applied to future purchases of loyalty points.

CIBC will pay $200 million to Air Canada, plus an additional $92 million that will be applied to future monthly payments for Aeroplan miles. Visa will also be making a payment to Air Canada.

Story continues below advertisement

WATCH: What Aeroplan members should know as Air Canada buys the loyalty program

Click to play video: 'Air Canada to buy Aeroplan but what does it mean for you?' Air Canada to buy Aeroplan but what does it mean for you?
Air Canada to buy Aeroplan but what does it mean for you? – Aug 22, 2018

The Montreal-based airline said it is still in talks with American Express, which also issues Aeroplan co-branded cards, to secure its continued participation.

Aimia shareholders must greenlight the Aeroplan purchase before it goes through, on top of closing conditions and regulatory approvals. They’re slated to gather for a special meeting on Jan. 8 in Montreal, the loyalty analytics company said.

READ MORE: Canada’s best credit cards to rack up travel rewards points

The deal is expected to close in January, Air Canada said.

“The proceeds realized from this transaction will put Aimia in the enviable position of having significant cash and investments on hand and no financial indebtedness,” Aimia chairman Robert Brown said.

Story continues below advertisement

The Aeroplan agreement will leave the company with more than $1 billion in cash to invest elsewhere, according to Mittleman Brothers, Aimia’s largest stakeholder at 17.6 per cent.

WATCH: Aeroplan withdraws survey amid criticism over controversial questions

Click to play video: 'Aeroplan withdraws survey amid criticism' Aeroplan withdraws survey amid criticism
Aeroplan withdraws survey amid criticism – Apr 2, 2018

Aimia management said in August it has considered further asset sales and a windup of the company.

Analysts have predicted about 1,000 Aeroplan employees – roughly 60 per cent of Aimia’s work force – will transfer to Air Canada if the deal goes ahead.

Air Canada chief executive Calin Rovinescu confirmed the company’s new loyalty program will launch in 2020, “safeguarding all Aeroplan Miles” for its roughly five million members.

READ MORE: Carry a credit-card balance? Rewards might cost more than you think

Story continues below advertisement

TD chief executive Bharat Masrani said the bank is pleased to become “the primary credit card issuer” for Air Canada.

Aimia’s shares were up 24 cents at $3.99 in trading on the Toronto Stock Exchange on Monday morning.

Sponsored content