Aimia Inc. reinvented itself on Wednesday as an investment manager with a new executive team, ending two years of shareholder battles over the company’s strategy following the sale of its Aeroplan loyalty program.
Montreal-based Aimia, a travel loyalty business, announced a series of transactions that will see the company acquire its largest shareholder, New York-based money manager Mittleman Brothers LLC, and merge its loyalty businesses with Waterloo, Ont.-based rival Kognitiv Corp.
Aimia named Philip Mittleman, chief executive officer of Mittleman Brothers, as its interim CEO, a position that is expected to become permanent once the acquisition of his privately owned firm closes. In a release on Wednesday, Aimia said its current CEO, Jeremy Rabe, “stepped down, effective immediately.” Mittleman Brothers owns 25 per cent of Aimia and supported the decision to hire Mr. Rabe two years ago, but the CEO and board of directors subsequently sparred publicly with the fund manager over its plans for the company.
Aimia’s major assets are stakes in several loyalty businesses, plus $350-million of cash that came from the sale of Aeroplan to Air Canada and $700-million of tax losses, which could offset future profit. The company was forced to sell Aeroplan back to Air Canada after the airline announced plans to break the relationship and start its own loyalty program, then made a hostile takeover offer.
Prior to Wednesday’s announcement and Mr. Rabe’s departure, analyst Drew McReynolds at RBC Dominion Securities Inc. said Aimia had “embarked on a consolidation strategy within the global loyalty and travel segment with the intention of deploying excess capital into acquisition opportunities.”
That focused strategy is now history. With Mr. Mittlemen as CEO and his brother Christopher Mittleman joining as chief investment officer and a board member, the company said in a press release: “Aimia is now positioned to invest wherever a suitable opportunity can be identified, in any sector.”
Aimia plans to buy Mittlemen Brothers for US$5-million in cash and four million Aimia shares. Mittleman Brothers was founded in 2005 and there is a third sibling, David, serving as head of sales. The firm is relatively small, with US$317-million of assets under management. The fund manager significantly underperformed benchmarks in recent years, turning in a 3.3-per-cent loss last year, when the S&P 500 rose 31.5 per cent, and averaging a 4.1-annual-loss over the past five years, while the S&P 500 index returned 11.7 per cent annually. Aimia is the fund manager’s largest holding and only Canadian investment.
The deal with Kognitiv will see Aimia contribute its loyalty business, plus $21-million of cash, to the 12-year-old Canadian company, which is led by founder Peter Schwartz, a former CEO at Descartes Systems Group. Kognitiv shareholders will invest $14-million in the combined company, and Aimia will hold a 49-per-cent stake if the transaction closes as expected by May 29.
When the dust settles at Aimia, Philip Mittleman is expected to be running a company with $265-million of cash, a 100-per-cent stake in Mittleman Brothers, 49 per cent of Kognitiv, 49 per cent of a joint venture loyalty program with Aeroméxico and 20 per cent of an AirAsia loyalty program. The number of employees at Amia is expected to fall from 450 to 20.
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U.K. Investment Body Issues Rebuke on Aston Martin Board – Yahoo Canada Finance
(Bloomberg) — An influential body representing the U.K. asset management industry issued a rebuke to Aston Martin Lagonda Global Holdings Plc after the luxury automaker lost all its female directors, a person with knowledge of the matter said.
The London-based Investment Association put out a so-called red top report on Aston Martin ahead of its annual general meeting Wednesday, according to the person. The report criticizes Aston Martin for its all-male board and cites a lack of diversity on its executive committee, the person said, asking not to be identified because the information is private.
Aston Martin’s three female directors all left the board in recent months. Canadian billionaire Lawrence Stroll became executive chairman in April, replacing Penny Hughes, after leading a bailout of the sports-car manufacturer. The other women on the board, Imelda Walsh and Tensie Whelan, previously said they wouldn’t stand for re-election and formally stepped down May 23.
The Investment Association’s members manage more than 7.7 trillion pounds ($9.7 trillion) of assets, according to its website. The body issues such reports through its research arm, the Institutional Voting Information Service.
Aston Martin shareholders approved most motions at Wednesday’s shareholder meeting nearly unanimously. About 5% of votes were cast against Stroll’s election to the board. The appointments of three other directors were also opposed by between 4% and 6% of investors at the meeting, the company said in a regulatory filing.
“It’s important to shine a spotlight on companies like Aston Martin who have restructured their board without any women,” said Denise Wilson, chief executive officer of the Hampton-Alexander Review, which lobbies for increased female representation on U.K. boards. “These are not the expectations of anybody for a publicly listed company.”
Digital services provider Kainos Group Plc and property investor Daejan Holdings Plc were the only members of the benchmark FTSE 350 Index with all-male boards last year, according to a November report from the Hampton-Alexander Review. Since then, Kainos has appointed a female director and Daejan has been taken private.
Aston Martin said in February it recognized its board composition wouldn’t be fully in line with U.K. corporate governance norms after the investment from Stroll’s consortium. The company only accepted the lack of compliance to support the capital raise and understands that “significant focus and effort” will need to be applied to the issue, it said in a filing at the time.
An Aston Martin spokesperson said “this is a particular focus for Mr. Stroll as incoming Executive Chair and his priority is to ensure the right balance of skills and experience to support the company in delivering its long-term potential.” The spokesperson added that Aston Martin was recruiting additional independent non-executive directors.
Proxy advisory firm Institutional Shareholder Services Inc. had recommended “qualified support” to Aston Martin’s proposed directors. The impending lack of balance on the board is largely due to Stroll’s investment in the company, and Aston Martin plans to fix the situation “as soon as practically possible,” ISS said in a report before the AGM.
Aston Martin’s biggest institutional shareholders include Fidelity Investments, which owns nearly 3%, and Invesco Ltd., which holds about 2%, according to data compiled by Bloomberg. Vanguard Group Inc. and Hargreaves Lansdown Asset Management Ltd. each have about 1.2%, the data show.
In May, Aston Martin ousted CEO Andy Palmer and named Tobias Moers, who leads Daimler AG’s Mercedes-AMG performance division, as his replacement.
Palmer, who joined Aston Martin from Nissan in 2014, had been focused on the introduction of the pivotal DBX, a $189,000 sport-utility vehicle at the heart of Aston Martin’s comeback strategy. The company is banking on the model selling in higher volumes than the iconic sports cars made famous in the early James Bond movies.
(Updates with vote outcome in fifth paragraph)
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Weekly investment update – 3 June 2020 – Investors' Corner BNP Paribas
growth in mortality rates, however, has fallen by nearly half from the March-April peaks, reflecting the shift in the focus of the pandemic towards emerging markets. Here, mortality rates have been consistently lower than in developed markets. Meanwhile, curves continue to flatten in the US and in particular in major European economies. Globally, deaths topped 382 000, as of 3 June.
Easing spreads across Europe
All major European countries have now eased the restrictions put in place to slow the spread of COVID-19, the Oxford Stringency index shows. Some countries are easing faster than others. Italy, in particular, stands out. Where the restrictions were once seen as the toughest in Europe, Italy now ranks as the laxest, with Spain now assessed to have the toughest regime.
Latin America remains the current pandemic hotspot: four out of the 10 countries reporting the highest number of new infections in recent days are from the region: Brazil, Peru, Chile and Mexico.
Brazil is now second only to the US in terms of confirmed cases and is fourth in fatalities after the US, UK and Italy. Brazil’s mortality curve remains worrying, and since there is no national lockdown, it is hard to tell when the peak will be reached.
No plain sailing after lockdown
Meanwhile, events in South Korea remind us that managing the virus outside of lockdown is not straightforward even for the best-in-class regime. South Korea reintroduced quarantine measures for the next two weeks due to the recent uptick in cases: parks, museums and art galleries were temporarily closed and school quarantine and distancing rules in Seoul were tightened.
On Thursday, 79 new cases had emerged, the highest since early April. Most of them were attributed to a single distribution centre for an online retailer. The new cluster led provincial governments in the region to postpone plans to reopen schools for kindergarteners and primary schoolers on Wednesday, although most of the country’s schools have reopened as planned.
The main news in recent days has been the announcement by the European Commission of the details of the long-term budget, the Multiannual Financial Framework (MFF), and its response to the current crisis, Next Generation EU.
Markets had focused on the latter. The Commission proposes a EUR 500 billion package of grants and EUR 250 billion in loans to be financed by debt issued in the capital markets. This is backed by the headroom in the EU budget between actual spending and the theoretical limit on the funds that the EU can claim from the member states.
Next Generation EU sets out an important principle: establishing a genuine fiscal capacity at the centre of Europe, which can be deployed to support demand in member, states that are hit by large shocks.
However, the details of the package are yet to be agreed by all member states. It seems likely that the generosity of the scheme may be diluted in the search for a compromise. The scale of the net transfers may be reduced. The conditionality attached to funds that already exists may be strengthened. The split between grants and loans may be recalibrated.
There have been two significant developments:
- The fallout from the decision by the Chinese authorities to introduce national security legislation in Hong Kong’s Basic Law. This has added to tensions in Sino-US relations over and above the blame game over the virus and an uneasy truce in the trade/tech war. There is a real risk of an escalation with obvious market consequences: China’s Foreign Ministry has warned, “Any words or actions by the US that harm China’s interests will meet with China’s firm counterattack.”
- In the US, George Floyd’s death has led to widespread public protest and instances of violence that prompted the authorities to impose curfews in cities and deploy the National Guard in multiple states. As yet, it is unclear whether this latest tragedy will trigger a moment of national reflection on the question of racial injustice and ultimately positive change, and whether more immediately it affects the presidential election.
- In an encouraging sign, US continuing claims for unemployment benefits have dropped for the first time since February. This points to the first green shoots in the labour market as quarantine restrictions are lifted. Any recovery hinges on improving employment for the bounce-back to be sustainable over the medium term. It is also crucial to keep social tensions to a minimum.
- We believe the economic environment remains weak and that the recovery will take longer than expected. This assessment is echoed by the ECB. Most developed economies will not have returned to the 2019 levels of activity by the end of 2021. In Europe, a greater dispersion in growth among countries has increased divergence. This is a key reason to have a unified fiscal approach, as per the latest European Commission proposal (see above).
- We expect further stimulus and central bank support given this weak outlook. On 4 June, the ECB is expected to announce a EUR 500 billion increase of its PEPP programme. It comes on top of the EUR 750 billion package proposed by the Commission. Extra packages by Japan, China and Germany all aim at securing a recovery and stabilising badly hit small and medium-sized firms.
- Government and central bank support is expected to ease financial conditions, especially in Europe where they have remained restrictive, and could lower the risk premium of eurozone assets and support the euro.
- The current backdrop supports risky asset valuations, even as the real economy struggles. The outlook for the US dollar is less solid: carry and growth advantages over the rest of the world have dissipated and political risk, once a US dollar supportive factor, has become a headwind.
- Investment-grade (IG) corporates have been tapping the market at a record pace and rotating away from funding via commercial paper (CP). This is further easing the stress on USD liquidity and demand for the US currency. Moreover, it creates a stronger liquidity backdrop for higher-rated corporates. That said, we see continued stress for the weaker companies and sectors most affected by the virus outbreak, creating greater dispersion in credit and equity markets.
- A slow weakening of the USD could enhance emerging market (EM) carry trades. Prospects look better for the less volatile Asian currencies over the more market-sensitive currencies as many of these countries have now become the new epicentres of the COVID-19 crisis (see above).
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
Ontario investing $150 million to improve broadband, cell service for rural communities. | News – Daily Hive
Ontario has announced it is investing $150 million in “reliable broadband and cellular service.”
According to the province, this funding will help create even more economic and educational opportunities in rural, remote, and underserved areas of the province.
“As we carefully restart the economic engine of Canada, every region and every community will play a role in bringing jobs and prosperity back to our province,” said Premier Doug Ford.
“By investing in reliable broadband and cellular service, we are helping to create greater opportunity for our families, farmers, and small business owners in rural and remote areas of this great province.”
The new Improving Connectivity in Ontario, or ICON, program, when leveraged, has the potential to result in an investment of up to $500 million in total partner funding to improve connectivity in underserved and unserved areas, according to the province.
“By doing their part and staying home to help stop the spread of COVID-19, the people of Ontario have demonstrated the need to be connected to learn, work, and run their businesses,” said Infrastructure Minister Laurie Scott. “It appears that functioning remotely will continue to be a regular way of life for many in this new environment, and fast reliable Internet will be critical. The ICON program is an important step towards bridging the digital divide in Ontario.”
The province said as many as 12% of households in Ontario are underserved or unserved, mostly in rural, remote or Northern areas.
And with Ontario’s education now online, it is an important component of the province’s plan.
The provincial government recently called on the federal government to take immediate action to improve Internet connectivity for Ontario students.
“Access to high-speed Internet is foundational to our young people’s success in learning, working, and innovating, today and into the future,” said Minister Stephen Lecce.
“Our government is taking action by connecting all schools to broadband, starting with high schools this September 2020 and elementary schools by September 2021. It is also why we are calling on the federal government to step up their investment to connect the next generation of thinkers and workers to the modern and digital economy.”
- See also:
On Tuesday, Ontario extended the province’s state of emergency for another 28 days, until June 30.
Ford said that this doesn’t mean the reopening of the economy is on hold, and that the province will continue to look into a regional approach.
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