In the Face of its Compelling Premium Cash Offer for Aimia, Mithaq has Serious Concerns with Aimia's Entrenched Directors Instead Seeking to Dilute Shareholders to Raise Unneeded Cash
Aimia's Private Placement Is Clearly a Defensive Tactic and Mithaq Is Pursuing Regulatory Remedies
Mithaq's All-Cash Takeover Bid for Aimia of $3.66 per Common Share Is the Best Option for Shareholders, Representing a Compelling Premium of Approximately 20% to Pre-Bid Trading Price on the TSX
Shareholders Should Continue to Visit www.cashpremiumforaimia.com for the Latest Updates
TORONTO, Oct. 16, 2023 /CNW/ - Mithaq Canada Inc. (the "Offeror"), a wholly-owned subsidiary of Mithaq Capital SPC ("Mithaq"), the largest shareholder of Aimia Inc. (TSX: AIM) ("Aimia"), today made the following statement regarding Aimia's October 13, 2023 announcement that it intends to dilute its long-suffering existing shareholders by issuing discounted shares and warrants to a new group of undisclosed investors in a private placement, raising cash that Aimia does not need, while increasing the share count by as much as 24.89% and providing this group with up to three of eight Aimia board seats, all in a bid to further entrench the Aimia board and management.
"The entrenched board's actions come at the expense of shareholder interests, are a breach of the directors' fiduciary duties and an affront to basic principles of public company governance," said Mr. Turki Saleh A. AlRajhi, Chairman and Chief Executive Officer of the Offeror. "Aimia's leadership was warned many months ago to cease their entrenchment tactics and to act in a manner consistent with their fiduciary duties, and its Chief Executive Officer is on the record stating that Aimia has ample cash flow and plenty of cash. The company even highlighted in an investor day presentation less than three weeks ago that investors should expect 'aggressive' share buybacks in 2023/2024. Instead, Aimia announced a massive, dilutive share sale. Investors are right to question the motives of Aimia's leadership."
"Now, with the Aimia board and management having opted to double-down on entrenchment efforts, the Offeror will pursue regulatory remedies available to it. Aimia's leadership has crossed bright governance lines and has placed themselves in a tenuous position," Mr. AlRajhi added. "Regardless, Aimia's entrenchment tactics serve to further underscore why long-suffering shareholders should immediately tender to the premium offer of $3.66 per common share in cash."
There are a number of reasons why Aimia's attempted private placement and related board appointments from this new investor group should alarm shareholders and regulators alike, including:
Aimia Has No Disclosed Need to Raise Cash. In fact, in Aimia's Q2 results on August 11, 2023, Phil Mittleman, Chief Executive Officer of Aimia, commented:
"…We are now the majority owner of two operating companies that we expect will provide revenue growth and strong cash flow generation for Aimia shareholders for years to come." As at June 30, 2023, Aimia reported $116.9 million in cash, cash equivalents and liquid securities.1
On Aimia's May 12, 2023 conference call, Mr. Mittleman noted:
"we're confident that we're going to have plenty of cash to execute what we need to execute," 2
Aimia Has Been Misleading Investors. Aimia's most recent press release announcing the private placement states that it only began considering available financing options six months ago (i.e., around the time of Mithaq's "no vote" campaign in connection with the April 2023 annual meeting) with "robust arm's length negotiations" commencing three months ago (i.e., after Mithaq disclosed it had increased its stake from 19.9% to 30.96%), yet Aimia's disclosures during this timeframe do not align with any purported need for a cash infusion, nor a "comprehensive process" that was underway.3 In fact, Aimia's presentation at the company's investor day on September 27, 2023 stated that investors should expect the company to restart its normal course issuer bid (NCIB) and "aggressive share buybacks" once a financing for Aimia's Tufropes acquisition is closed.4 Then, only 16 days later, the company announced a massive, discounted and dilutive share sale, something which is diametrically opposed to returning capital to existing shareholders and contradictory with respect to Aimia's capital planning and business strategy;
Private Placement Is Dilutive, Discounted and Unfair to Existing Aimia Shareholders. Aimia's leadership has priced the common shares and accompanying warrants at $3.10 per common share in the private placement and had the gall to misleadingly position that price as a premium to the trading price on September 14, 2023, completely unreflective of recent trading. In fact, this is a significant discount to the recent trading price of Aimia's common shares on the Toronto Stock Exchange. Long-suffering, existing shareholders were not given the opportunity to participate in this private placement and should ask themselves why. The answer is that Aimia is clearly seeking to put a stake with material impact on control of the company into board- and management-friendly hands;
Private Placement Exposes There Is No Plan to Create Value Beyond What is Already Available to Shareholders via the Cash Premium Takeover Offer:
The $3.10 valuation on the share portion of the private placement is a clear signal by the board and management to existing shareholders that the current $3.66 all-cash offer is a very attractive premium offer; and
The strike price of the warrant component of the private placement is $3.70 per warrant, and the warrants are immediately exercisable and expire five years from issuance. These terms are highly problematic and concerning for shareholders. In plain language, Aimia's management is basically saying "even with a cash infusion, Aimia investors can only expect our leadership team to create a few cents in value beyond the current $3.66 all-cash offer currently available to Aimia shareholders over the next five years." Shareholders should ask themselves whether they want to wait as long as five years to see the stock at $3.70, when there is a $3.66 a share cash offer on the table today. Essentially, Aimia's leadership is conceding that the best option for current shareholders of Aimia is to tender to the premium all-cash offer.
Aimia's Board Hasn't Made a Recommendation Regarding the Premium Cash Offer but Has Found Time to Close an Unnecessary Private Placement. The Offeror formally commenced its premium all-cash offer for Aimia on October 5, 2023 (the "Offer"). Aimia's board has not yet completed its review of the Offer nor made a formal recommendation regarding the Offer, but has found time to attempt to complete a dilutive private placement and hand over up to three out of eight Aimia board seats to this new investor group. Essentially, the warrants act like a "stealth poison pill", protecting the entrenched management and board and telegraphing they prefer to massively dilute shareholders over engaging with the Offeror in regards to its premium all-cash offer;
If a responsible board was seriously considering an offer and the best interests of shareholders, its first response would not be to issue more shares at a significant discount to new shareholders, especially when under Canada's takeover bid regime, the board has more than three months from bid commencement to seek value enhancing alternatives;
The Offeror Believes That the Entrenched Directors Who Made the Decision to Dilute Fellow Shareholders Were Not Properly Elected. In its October 5, 2023 press release, the Offeror alerted shareholders that it has reason to believe that none of the directors of Aimia would have been elected at the most recent meeting of shareholders in April had the meeting been conducted independently and that Mithaq is now seeking declaratory relief and an order requiring that Aimia immediately call and promptly hold a special meeting of shareholders to elect new directors. The dilutive private placement seems designed to materially affect the outcome of any vote on the election of directors;5 and
Any New Directors Should Be Presented to Shareholders for Election at a Meeting and Not Appointed by This Self-Interested Board. These proposed director appointments from the new investor group have been made by a board that Mithaq believes – and intends to prove in court – is without legal authority. Furthermore, shareholders should be highly skeptical of the independence of the investor group directors given their appointment in the context of a heavily discounted private placement following the commencement of the Offer. Aimia should be aware that the Offeror is considering the implications of any joint-actorship by this group of new directors and undisclosed investors.
Unfortunately, the Offeror is not surprised that Aimia is pursuing these tactics, given its record of prior entrenchment attempts. Fellow shareholders will recall that the Offeror was concerned many months ago that Aimia's leadership would attempt an unnecessary private placement. In a June 5, 2023 press release, the Offeror went public with its concerns and explicitly warned Aimia's leadership not to further entrench itself in the face of shareholder discontent, including attempting an unnecessary private placement of shares to dilute the ownership of all shareholders, including the Offeror.
The Offeror, with the assistance of its advisors, is pursuing remedies in regards to the tactical private placement and will provide further updates to shareholders if/as developments warrant.
The Choice For Long-Suffering Shareholders Is Clear – Tender to the Premium Cash Offer Today
The cash consideration under the Offeror's takeover bid represents premiums of approximately:
20% based on the closing price of $3.05 per common share on the TSX on October 2, 2023 (the last trading day prior to the announcement of the intention to make the Offer); and
23% to the volume weighted average trading price of $2.98 per common share on the TSX over the 20 trading days ended October 2, 2023.
Full details regarding the premium cash Offer, including a letter to shareholders and takeover bid circular, are available at www.cashpremiumforaimia.com as well as under Aimia's profile on SEDAR+ at www.sedarplus.ca.
As an update on the Offer, Mithaq is pleased to announce that the Commissioner of Competition has issued an Advance Ruling Certificate in respect of the Offer, which constitutes "Competition Act Approval" under the terms of the Offer.
Shareholders with questions or in need of assistance accepting the Offer can contact Carson Proxy Advisors by telephone at 1-800-530-5189 (North American Toll-Free Number) or 416-751-2066 (outside North America) or by email at info@carsonproxy.com.
Further information is also available at www.cashpremiumforaimia.com, which will be updated as the tender process proceeds.
This press release does not constitute an offer to buy or the solicitation of an offer to sell any securities of the Offeror, Mithaq or Aimia.
ABOUT MITHAQ
Mithaq is the largest shareholder of Aimia, holding 26,059,000 common shares of Aimia representing approximately 30.96% of the issued and outstanding common shares of Aimia. Mithaq is a segregated portfolio company and affiliate of Mithaq Holding Company, a family office based in Saudi Arabia with investments in public equities, real estate, private equity and income-producing assets in local and international markets.
ADVISORS
Torys LLP is acting as legal advisor, Carson Proxy Advisors is acting as Information Agent and Longview Communications and Public Affairs is acting as communications advisor to the Offeror and Mithaq in respect of the Offer.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document contains "forward-looking statements" (as defined under applicable securities laws). These statements relate to future events or future performance and reflect the Offeror and Mithaq's expectations, beliefs, plans, estimates, intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements include, but are not limited to, statements regarding: the Offer, including the response of Aimia's board and management to the Offer; risks and challenges facing Aimia; Mithaq's beliefs with respect to its investment in Aimia and its related strategy; statements in respect of litigation with Aimia; and statements with respect to Mithaq's intention to seek regulatory remedies in respect of Aimia's actions. Such forward-looking statements reflect the Offeror and Mithaq's current beliefs and are based on information currently available. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", "target", "intend", "could" or the negative of these terms or other comparable terminology.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and a number of factors could cause actual events or results to differ materially from the results discussed in the forward-looking statements. In evaluating these statements, readers should specifically consider various factors that may cause actual results to differ materially from any forward-looking statement. These factors include, but are not limited to, market and general economic conditions (including slowing economic growth, inflation and rising interest rates) and the dynamic nature of the industry in which Aimia operates.
Although the forward-looking information contained in this document is based upon what the Offeror and Mithaq believe are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. The forward-looking statements contained in this document are made as of the date of this document and should not be relied upon as representing views as of any date subsequent to the date of this document. Except as may be required by applicable law, the Offeror and Mithaq do not undertake, and specifically disclaim, any obligation to update or revise any forward-looking information, whether as a result of new information, further developments or otherwise.
Neither the Offeror, Mithaq nor or any of their subsidiaries, affiliates, associates, officers, partners, employees, representatives and advisers, make any representation or warranty, express or implied, as to the fairness, truth, fullness, accuracy or completeness of the information contained in this document or otherwise made available, nor as to the reasonableness of any assumption contained herein, and any liability therefore (including in respect of direct, indirect, consequential loss or damage) is expressly disclaimed. Nothing contained herein is, or shall be relied upon as, a promise or representation, whether as to the past or the future and no reliance, in whole or in part, should be placed on the fairness, accuracy, completeness or correctness of the information contained herein.
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SOURCE Mithaq Canada Inc.
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