TD, Aimia, and CIBC Continue Portfolio Acquisition Discussions
TD, Aimia, and Canadian Imperial Bank of Commerce announced this morning that they are continuing talks in connection with the possible acquisition by TD of part CIBC’s existing Aeroplan credit card portfolio.
On August 12, 2013, Aimia announced that TD will become the primary credit card issuer of the Aeroplan program as of January 1, 2014. The parties have been in negotiations to work-out a framework that would allow CIBC to retain current Aeroplan cardholders it has a core banking relationship with, i.e. checking account, savings account, mortgage, etc… In return, it would sell its non-relationship accounts to TD. Analysts estimate this would equate to approximately half of the portfolio retained by CIBC.
Based on CIBC’s statements, it seems that it continues to argue that the contract offer it had the right to match, was not consistent with the matching rights articulated in its agreement with Aimia. Our suspicion is, that aside from a calculation that the cost of a brokered peace was cheaper than the cost of war, CIBC has used litigious leverage to negotiate retention rights, i.e. either TD agrees or CIBC will litigate and delay the launch of the program between TD and Aimia.
Terms of the work-out proposal have not been disclosed. But analysts have indicated it could see CIBC continue to offer an Aeroplan credit card to its relationship customers. The question then would be, what would CIBC be paying Aimia per point, up-front etc… How would CIBC and TD agree on dividing up future marketing efforts? Would CIBC be allowed to offer a similar Aeroplan product as TD to its own CIBC customers? If TD has agreed to pay Aimia a $100M up-front signing bonus, how much of it was predicated on capturing the 50% of CIBC relationship cardholders? How much of the estimated $40 billion in cardholder spend comes from CIBC’s relationship accounts?
TD has stated in a release this morning that “the parties will make an announcement when an agreement has been reached or when the discussions have concluded without an agreement. There can be no assurances that an agreement will be reached.”