Aimia wins as TD Bank, CIBC reach deal on loyalty card

Mon Sep 16, 2013 10:45am EDT
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(Reuters) - Aimia Inc (AIM.TO: Quote), which runs the Aeroplan credit card loyalty program, emerged as the clear winner on Monday after reaching a deal that will see both Toronto-Dominion Bank (TD.TO: Quote) and Canadian Imperial Bank of Commerce (CM.TO: Quote) issue its branded cards.

The agreement, which drove Aimia's shares to a five-year high, averts a potential legal battle between the two banks, which are also Canada's top two credit card issuers.

Earlier this year, TD Bank replaced CIBC as the issuer of the popular Aeroplan flight rewards Visa card. CIBC had been the main issuer for more than 20 years but failed to reach agreement with Aimia to extend the partnership, which expired on December 31.

In June, TD Bank, Canada's second largest in terms of assets and market capitalization, made a deal with Aimia to replace CIBC. But the two banks said last month they were working on a compromise to split the credit card portfolio down the middle.

CIBC, Canada's No. 5 bank, will retain card customers that have other products with the bank, while TD Bank will acquire the remainder.

TD Bank said on Monday it will pay C$162.5 million ($157.22 million) to CIBC to acquire about 550,000 cardholder accounts, representing about C$3 billion in card balances and C$20 billion in annual retail spending.

Aimia said CIBC will keep the remaining 630,000 Aeroplan accounts held by existing banking customers. CIBC will continue to have the right to market the Aeroplan program and to issue new Aerogold cards through its CIBC brands.

"Ultimately, we believe that the biggest winner of the agreement is Aimia, which now has two banks issuing its branded card, while the remaining banks will see far less opportunity to benefit as attrition will likely be much lower under an orderly transition scenario," said Barclays analyst John Aiken in a note to clients.


A TD Canada Trust branch is seen in the financial district in Toronto, January 28, 2013. REUTERS/Mark Blinch