- Aimia's disappointing state of affairs is largely due to a lack
of ownership by the Board, which has overseen tepid performance and
misaligned strategy;
- Lack of respect for shareholder democracy is also
disappointing, as is the Board's unwillingness to constructively
engage with shareholders and instead opt for entrenchment tactics
and threats;
- Unfounded allegations against 19.9% shareholder are a
transparent attempt to distract and mislead, increasing shareholder
momentum against the re-election of Aimia's directors; and
- Largest shareholder urges fellow shareholders to vote against
the re-election of the Board at the Meeting to enable positive
change at Aimia.
TORONTO, April 10, 2023 /CNW/ - Mithaq Capital
SPC ("Mithaq"), the largest shareholder of Aimia Inc.
(TSX: AIM) ("Aimia") holding 19.9% of Aimia's common shares,
today outlined further reasons why it intends to vote against
Aimia's underperforming and entrenched board of directors (the
"Board") at the upcoming annual meeting of shareholders to
be held on April 18, 2023 (the
"Meeting").
Mithaq is a strategic shareholder with a history of supporting
first-class management teams and championing lifelong partnerships
that are based primarily on trust. However, as Mithaq has stated
previously, it is no longer content with Aimia's failing
performance and has lost trust.
Since announcing its decision to vote against the Board on
April 6, Mithaq has received numerous
unsolicited expressions of support from other shareholders, who
have stated their intention to Vote "AGAINST". It appears
that Mithaq's frustration is shared widely. Given Aimia's flailing
response, it seems that its directors are also aware of the
increasing momentum against their re-election.
In addition, Mithaq addressed the unfounded allegations made by
Aimia in response to Mithaq's announcement of its intention to
exercise its fundamental rights as a shareholder and vote against
the Board at the upcoming Meeting. Aimia's allegations are a
blatant, public example of the Board's recent campaign to frustrate
shareholder democracy and entrench itself.
Mithaq encourages fellow shareholders to Vote "AGAINST" the
re-election of David Rosenkrantz
(Chair), Philip Mittleman,
Michael Lehmann, Karen Basian, Kristen M.
Dickey, Linda S. Habgood,
Jon Mattson and Jordan G. Teramo to the Board at the Meeting.
Doing so will help bring about the positive change that Aimia
needs.
Pursuant to recent amendments to the Canada Business
Corporations Act ("CBCA"), directors of CBCA
corporations such as Aimia must be elected by a majority of the
votes cast for and against them. Accordingly, if a director
receives more votes against their election than for their election,
they will not be elected to the Board at the Meeting. In the event
that fewer than three directors are elected at the Meeting, Aimia
will be required to call a special meeting without delay for the
election of directors.
Reasons to Vote "AGAINST" Aimia's Underperforming
Directors
In addition to concerns previously raised with Aimia regarding
capital allocation decisions and acquisitions, Mithaq believes that
the Board as presently constituted is not suited to act in the best
interests of Aimia and its stakeholders for the following
reasons:
- Disappointing Performance: In his letter to shareholders
in connection with the Meeting, Philip
Mittleman, the CEO of Aimia and a member of the Board,
admitted that full-year share price performance fell short of
management's expectations and that the stock price continues to
trade significantly below the value of Aimia's assets. Recent
acquisitions have not been well-received by the market, including
the recent acquisition of Tufropes Pvt Ltd. and India Nets, which
caused Aimia's share price to fall 9.2% from $4.04 on January 30,
2023, the day prior to the announcement, to $3.67 on January 31,
2023.
After announcing the sale of PLM in June
2022, and despite receiving PLM proceeds of C$5.84 per share, Aimia's share price barely
moved. Mithaq received several emails from fellow shareholders
expressing concern and distrust of management. Mithaq conveyed the
frustration of fellow shareholders to the Board and management by
forwarding the emails to Philip
Mittleman. The fact that Aimia's share price does not even
reflect the cash it has on its balance sheet clearly shows the lack
of trust by shareholders and the market.
- Misaligned Investment Strategy: After receiving the PLM
proceeds, during the Q2 2022 earnings call, Philip Mittleman said that "Aimia intends to
deploy most of the proceeds towards the acquisition of majority or
significant minority stakes in cash-generative businesses operating
in either the U.S. or Canada that
will ideally utilize our sizable tax losses." However, instead of
buying businesses in U.S. and Canada where most of its tax losses are, Aimia
announced acquisitions in India
and Italy where no tax losses
appear to exist.
In August 2022, when releasing its Q2
2022 financial results, management said that "Aimia also intends to
allocate up to $75.0 million of the
net proceeds towards a combination of opportunistic share buybacks
and/or a tax-efficient special dividends to common shareholders."
Management neither issued a tax-efficient special dividend nor
fully utilized C$75 million in share
buybacks.
- Misguided Focus on Private Markets: In Aimia's press
release it stated that "Mithaq have previously lobbied the Company
to invest in public securities." Here are the facts: on a call with
Aimia's management in the second half of 2022, Philip Mittleman asked Mithaq to share its best
investment ideas in public markets, which Mithaq happily did. In
the current market environment, Mithaq's view is that the
dislocation between market price and intrinsic value in public
markets is much higher than for arms-length transactions in private
markets. Mithaq communicated to Aimia's management its view that,
given the nature of negotiations in the private equity market
(arms-length and fully negotiated price), there is hardly any value
discovery.
Instead of thoughtfully taking these shareholder concerns into
consideration, Aimia announced that it was putting significant
liquidity into two more private equity transactions in India and Italy. Upon speaking with fellow shareholders
of Aimia, Mithaq was surprised to learn it was not alone in pushing
management to seek opportunities in the public markets.
- Low Share Ownership and Lack of Alignment with Shareholder
Interests: According to last year's management information
circular, Board members owned, collectively, a mere 2.73% equity
stake. If the Board had sufficient ownership, it would have its
interests aligned with all shareholders.
Excluding Philip Mittleman (1.7%)
and Michael Lehmann (0.7%), the
combined equity ownership of the Board is currently just 0.33%.
Kristen M. Dickey, Linda S. Habgood and Jon
Mattson do not currently meet Aimia's minimum share
ownership requirement and do not own any shares.
- Lack of Communication, Unfair Compensation Structure and
Expensive Investment Holding Company Set-up: After receiving
only 67.5% approval in the most recent "Say on Pay" vote, Aimia's
stated in its management information circular for the Meeting that
it had consulted with 50 shareholders representing 60% of
outstanding common shares regarding Aimia's executive compensation
program. Despite being one of Aimia's largest shareholders, Mithaq
was never consulted. On April 13,
2022, Mithaq reached out to Aimia's management highlighting
its concerns regarding management compensation, particularly the
lack of tangible and/or calculable performance-based key
performance indicators (KPIs), which would bring more transparency
to compensation decisions.
Aimia's current operating expense at the head office level is at an
approximate C$15 million annual run
rate, which is a grossly inappropriate set-up for an investment
holding company of Aimia's size. In addition to this, by bringing
Paladin into the recently announced acquisitions, Aimia
shareholders will be paying a 2% annual management fee and a 20%
performance fee.
On top of all of this, by deploying almost all PLM proceeds into
the two recently announced private equity transactions and then
introducing a short term incentive plan ("STIP") linked to
the growth of net asset value ("NAV"), management has
created a self-fulfilling annuity-type stream of STIP payments for
themselves because Aimia will not have to revalue these assets on
its balance sheet. A reasonably profitable private equity business
would always result in a continuous increase in NAV and thus a
guaranteed STIP payment for management year after year.
Aimia Board's Attempts to Entrench Itself and Frustrate
Shareholder Democracy
Aimia's lack of respect for shareholder democracy is
disappointing, as is the Board's unwillingness to constructively
engage with shareholders and instead opt for entrenching tactics
and threats.
In Aimia's press release, Philip
Mittleman stated that it is unfortunate that Mithaq is
pursuing a change in Aimia's strategy in this manner. This is
telling, as it is clear that Philip
Mittleman does not appreciate that voting at a company's
annual meeting is a fundamental right of shareholders. The Board is
accountable to Aimia shareholders and, if shareholders do not have
confidence in the Board's strategy and performance, they have every
right to vote against its re-election. This is the reason that
annual meetings are held.
Mithaq's decision to vote against the Board was made only after
Mithaq's concerns were raised with the Board and its response was,
unfortunately, to threaten legal and regulatory action.
Aimia's Unfounded Allegations
While Mithaq considers Aimia's allegations to be a transparent
attempt at distraction in advance of the Meeting, fellow
shareholders should be aware that:
- All shareholders, including Mithaq, are entitled to communicate
with other Aimia shareholders regarding their investment in Aimia
and concerns they may have with management and the Board. Mithaq's
communications do not rise to the level of joint actorship as
wrongfully alleged by Aimia in recent correspondence with Mithaq
and the related complaint that Mithaq understands Aimia has made to
the securities regulatory authorities. Shareholders are also
entitled to hire advisors and avail themselves of the proxy
solicitation exemptions available under corporate and securities
laws. Aimia's tactics and threats are nothing more than an attempt
to intimidate, divide and silence its shareholders and Mithaq is
considering all legal options available to it to protect its
rights;
- There has been no misuse of confidential information by Mithaq.
Any information provided to Mithaq by the Company or its employees
(past or present) was neither material nor relevant to Mithaq's
investment decisions. Rather, Mithaq has encouraged the Company to
make more information available to all shareholders. Mithaq is very
concerned that the Board and management are continuing to waste
company resources investigating this matter any further rather than
focusing on operating Aimia's business and improving its
performance; and
- In its press release, Aimia conflates Mithaq and Aimia's former
director and senior officer of an affiliate with respect to the
recommendation of an investment that subsequently filed for
bankruptcy. Mithaq made no such recommendation.
Additional Information
The information in this press release may constitute a
solicitation of a proxy, as permitted pursuant to the public
broadcast exemption under applicable corporate and securities laws.
Accordingly, Mithaq is providing the disclosure required under the
CBCA and section 9.2(4) of National Instrument 51-102 –
Continuous Disclosure Obligations in accordance with
corporate and securities laws applicable to public broadcast
solicitations.
This press release and any solicitation made by Mithaq in
advance of the Meeting is, or will be, as applicable, made by
Mithaq, and not by or on behalf of the management of Aimia. Any
costs incurred for any solicitation will be borne by Mithaq,
provided that, subject to applicable law, Mithaq may seek
reimbursement from Aimia of Mithaq's out-of-pocket expenses,
including proxy solicitation expenses and legal fees, incurred in
connection therewith.
Mithaq is not soliciting proxies in connection with the Meeting
at this time. Proxies may be solicited by Mithaq pursuant to an
information circular sent to Aimia shareholders after which
solicitations may be made by or on behalf of Mithaq by mail,
telephone, fax, email or other electronic means as well as by
newspaper or other media advertising and in person by directors,
officers and employees of Mithaq who will not be specifically
remunerated therefor. Mithaq may also solicit proxies in reliance
upon the public broadcast exemption to the solicitation
requirements under applicable Canadian corporate and securities
laws by way of public broadcast, including through press releases,
speeches or publications, and by any other manner permitted under
applicable law. Mithaq may engage the services of one or more
agents and authorize other persons to assist in soliciting proxies
on behalf of Mithaq.
Mithaq has entered into an agreement with Carson Proxy pursuant
to which Carson Proxy will provide certain advisory and related
services including proxy solicitation. The anticipated cost of any
solicitation is estimated to be up to $175,000 plus disbursements and success fee (if
applicable).
If Mithaq commences a formal solicitation of proxies in
connection with the Meeting, proxies may be revoked by instrument
in writing by the shareholder giving the proxy or by its duly
authorized officer or attorney, or in any other manner permitted by
applicable law. None of Mithaq or, to its knowledge, any of its
associates or affiliates, has any material interest, direct or
indirect, (i) in any transaction since the beginning of Aimia's
most recently completed financial year or in any proposed
transaction that has materially affected or would materially affect
Aimia or any of its subsidiaries; or (ii) by way of beneficial
ownership of securities or otherwise, in any matter proposed to be
acted on at the Meeting other than the election of directors or the
appointment of auditors.
Aimia's head office address is 176 Yonge Street, 6th
Floor, Toronto, Ontario, M5C 2L7.
A copy of this press release may be obtained on Aimia's SEDAR
profile at www.sedar.com.
SOURCE Mithaq Capital SPC