Aimia Inc. made its biggest move yet under its new strategy as an investment holding firm, scooping up a 10-per-cent stake in one of China’s largest outdoor advertising firms.
The Montreal-based company announced Wednesday it has invested about $75-million in Clear Media Ltd. as it seeks to transition away from rewards programs and spend the proceeds of its $516-million sale of Aeroplan to Air Canada last year.
The investment follows a decision to spin off its loyalty points business – which lost $27.1-million last quarter – in a merger with Kognitiv Corp. unveiled on April 29, when Aimia also overhauled its board and replaced its CEO after a tumultuous year of shareholder unrest and litigation.
Clear Media describes itself as the largest operator of bus-shelter ads in China, touting more than 57,000 panels across 25 cities. Based in Hong Kong and listed on its stock exchange, the debt-free company generated $286.3-million in sales and reported an earnings loss of $17.2-million in 2019.
Aimia’s investment comes ahead of a pending sale by controlling shareholder Clear Channel Outdoor, which plans to by sell its 50.9-per-cent stake to Ever Harmonic Global Ltd. – which in turn has 40-per-cent ownership by Clear Media CEO Han Zi Jing and 30-per-cent ownership by Ant Financial, a company controlled by Jack Ma, co-founder of Chinese e-commerce giant Alibaba Group.
“When you have Jack Ma involved ... backed by a blue-chip consortium of investors and a highly skilled management team ... you’ve got a deal that you would dream of participating in as an outsider,” Aimia CEO Phil Mittleman said on a conference call with analysts Wednesday.
Clear Media will likely “go private,” he said.
“I think they want to kind of hyper-grow this and do what they want to do without having to deal with public market expense and disclosure,” he said. “We believe that they’ll wind up doing an IPO for this in a few years, and that would be the exit strategy.”
Clear Media’s parent has been trying to gin up liquidity after it withdrew its guidance and announced cost-cutting measures amid the fallout from the COVID-19 pandemic in China. One-third of the 58.8 million shares Aimia acquired in the company were previously held by clients of Mittleman Investment Management, whose parent company Aimia bought in a US$5-million deal that awaits closing.
“We have the opportunity because Mittleman Brothers had some stock. And because other people have stock they couldn’t hold,” Mr. Mittleman said.
Aimia’s share price rose more than 13 per cent or 31 cents Wednesday to close at $2.65 on the Toronto Stock Exchange.
The company also plans to provide US$100-million in financial support to Aeromexico from PLM, which runs the airline’s Club Premier loyalty program and in which Aimia has a minority stake. The support would come through US$50-million in loans and US$50-million prepurchases of award tickets.
The proposal is part of an agreement in principle signed by Aimia and Aeromexico that would grant the carrier a seven-year option to buy Aimia’s 48.9-per-cent stake in PLM at a multiple of 7.5 times adjusted earnings, with a minimum floor of US$400-million. The deal is expected to close within 60 days.
Aimia had about $322-million in bond investments and cash as of March 31, and expects to retain about $190-million in cash and liquid investments after recently announced transactions close.
Last month, Aimia said its money-losing Loyalty Solutions business would join forces with Waterloo, Ont.-based tech company Kognitiv Corp. to form a new entity called Kognitiv. Aimia plans to transfer 400 of its 420 employees along with $21-million to the holding for a 49-per-cent stake after laying off 30 workers last quarter.
In March, Aimia signed an agreement to buy its biggest shareholder (25.9 per cent) Mittleman Brothers LLC, a New York-based investment firm run by Aimia’s new CEO and his brother Christopher, who will join his sibling on the board when the deal closes.
Founded in 2005, Mittleman Brothers turned a 3.3-per-cent loss in 2019 while the S&P 500 Index rose 31.5 per cent. The investment firm averaged a 2.9-per-cent annual loss over the past five years compared with 12.5-per-cent growth on the S&P 500.
The fund manager had 163 clients and assets under management US$312.9-million as of March 30.
Aimia reported Wednesday a first-quarter loss of $9.6-million or 14 cents per share compared with a profit of $1.05-billion or $6.85 per share a year ago when its results were boosted by the sale of its Aeroplan business to Air Canada.
Revenue in the quarter ended March 31 totalled $29.6-million compared with $34.7-million a year earlier.
On an adjusted basis, earnings saw a loss of 14 cents per share versus a loss of 5 cents per share the previous year.
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