Blackstone and three major Canadian institutional investors have agreed to acquire a 25% interest in Air Canada’s Aeroplan loyalty programme in a transaction that values the business at CAD10bn ($7.2bn), according to a report by Bloomberg.
The consortium is paying C$2.5bn ($1.8bn) for the minority stake, with the investment group also including Caisse de dépôt et placement du Québec, PSP Investments and British Columbia Investment Management Corp.
Air Canada will retain control of Aeroplan following the transaction, while securing a substantial cash injection that it plans to use to help meet a C$1.2bn bond maturity and fund share buybacks.
The deal places a significant premium on Aeroplan relative to Air Canada itself, with the implied valuation of the loyalty business exceeding the airline’s market capitalisation by around CAD2.4bn.
The transaction also underlines growing private equity and institutional investor interest in loyalty programmes, which can generate recurring revenues through partnerships with financial institutions and other businesses.
Aeroplan generates income from credit card issuers including American Express, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce, which purchase points for distribution to their customers. Members can redeem the points for flights and other rewards.
The programme has more than 10 million members globally and offers rewards across Air Canada’s network as well as through partner airlines, hotels and car rental businesses.
Air Canada will retain an option to buy back the consortium’s 25% interest between the fifth and eighth anniversaries of the transaction’s closing, alongside additional repurchase rights in certain circumstances.
