Aeroplan aims to convert into a corporation

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By: Wise Marketer Staff |

Posted on May 13, 2008

Aeroplan aims to convert into a corporation

Aeroplan Income Fund has announced that it has received board approval to reorganise its income trust structure into a growth oriented, dividend paying, global loyalty management public corporation. The reorganisation, however, is still subject to unit holder and regulatory approvals.

Upon completion of the reorganisation, it is anticipated that the dividend policy will initially be set at Can$0.125 per common share per quarter, with the first dividend to be declared payable in respect of the quarter ending 30th September 2008.

Major milestone "The reorganisation will be a major milestone in our evolution," commented Rupert Duchesne, president and CEO for Aeroplan. "This change in structure will be fundamental in helping us achieve our strategic objectives over the coming years, mainly through increased flexibility to pursue attractive growth and acquisition opportunities as well as through unrestricted access to capital markets and foreign investors."

Following the reorganisation, the composition of the Board of Directors of the resulting public corporation will be the same as that of Aeroplan Holding GP Inc., and Rupert Duchesne will serve as President and CEO. Also, David L. Adams will serve as EVP and Chief Financial Officer, and Alex Moorhead will take on the position of EVP and Chief Commercial Officer, while Liz Graham will become EVP and Chief Operating Officer.

Reasons for the change Since its initial public offering in June 2005, Aeroplan has operated under a trust structure which allowed it to continue to execute against its stated business strategy. Following the 31st October 2006 Federal government tax policy relating to income trusts, Aeroplan has continuously reviewed its strategic objectives and options in that respect, to help ensure that its capital structure remained efficient and that unit holder value is maximised.

Due in part to the current foreign ownership limitations applicable to the fund, and to the increasing level of non-resident ownership in the fund, the new tax treatment of publicly traded mutual fund trusts (including limitations regarding normal growth and undue expansion), as well as the evolution of the fund's growth strategy, the Board of Trustees and the Board of Directors requested in March 2008 that the fund's management should appoint financial advisors to conduct an in-depth analysis of the fund's capital structure and its viability in the context of a strategy to become a global loyalty management leader.

Conclusions As a result of that analysis, it was determined that the arguments in favour of moving to a corporate structure were compelling, because the reorganisation would:

  • Resolve issues relating to potential non-compliance with foreign ownership limitations, should additional units of the fund be purchased on the public market or otherwise by non-residents;  
  • Provide better access to global capital markets to finance the fund's growth strategy in a timely and cost-efficient way;  
  • Help to maximise returns for shareholders and enhance the fund's ability to maintain an adequate investment-grade capital structure;  
  • Expand the fund's flexibility and ability to pursue growth and acquisition opportunities.

Financial advisors RBC Dominion Securities and TD Securities are acting as financial advisors with respect to the arrangement, and they have each concluded that the consideration to be received by unit holders is fair from a financial point of view.

The Aeroplan directors and trustees, based upon their own investigations, have also unanimously decided that the arrangement is fair to unit holders, and that it is in the best interest of the fund and its unit holders. They therefore recommend that unit holders should vote in favour of the new arrangement.

Mechanics of the arrangement If approved, the Arrangement will result in the reorganisation of the Fund's income trust structure into a growth oriented, dividend paying, global loyalty management public corporation and the units of the Fund held by unit holders will be transferred to the corporation in consideration for common shares on the basis of one common share for each unit transferred. It is expected that the reorganisation will be completed on a tax-free rollover basis, subject to the filing of any required tax elections.

The arrangement is subject to approval by not less than two-thirds of the votes cast by the unit holders voting in person or by proxy at an annual and special meeting of the unit holders scheduled to be held on 19th June 2008. It is also subject to the approval of the Superior Court of Quebec and all necessary regulatory approvals. The company will apply to the Toronto Stock Exchange for the listing of its common shares and the Fund will seek the delisting of its units from the Toronto Stock Exchange following completion of the arrangement.

Aeroplan expects, subject to the required approvals, that the reorganisation will be effective on or about 25th June 2008.

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