Groupe Aeroplan to buy up Carlson Marketing
Groupe Aeroplan, the international loyalty management firm headquartered in Canada, has entered into an agreement with Carlson Companies in the US to purchase Carlson Marketing for US$175.3 million (Can$188.0 million).
The agreed deal will include transaction costs of some US$6.5 million (Can$7.0 million) and it is subject to certain working capital adjustments. Groupe Aeroplan also says it expects to incur one-time costs of some US$15 million (Can$16 million), mainly related to the migration of technology systems away from Carlson Companies' infrastructure.
Needless to say, the acquisition will also be subject to customary closing conditions and antitrust approvals in both the United States and Canada, and is currently expected to close by early December 2009. The deal will be financed with both cash-on-hand and bank facilities.
Expansion plan Through the planned acquisition, Carlson Marketing will gain access to an expanded range of loyalty marketing capabilities, sector-specific loyalty marketing expertise in key vertical markets (e.g. retail, travel and transportation), enhanced loyalty programme analytics, and a parent company with a strong balance sheet that will help future growth.
Carlson Marketing's solid US presence is expected to secure a solid footprint for Groupe Aeroplan in the US, providing geographic diversification and accelerating the company's existing international expansion strategy into the G20 countries. Carlson Marketing's clients include major global brands in sectors including financial services, automotive, technology, consumer packaged goods (CPG) and pharmaceuticals, and the company has a presence in North America, Europe, Asia Pacific and the Middle East.
"This acquisition is a logical extension for our company as we diversify our business model to include a broader range of services within the loyalty management space, both in the US and internationally," said Rupert Duchesne, president and CEO for Groupe Aeroplan.
What the future holds Groupe Aeroplan's businesses and Carlson Marketing will continue to operate separately and independently. Carlson Marketing's management team, led by president and CEO Jeff Balagna, will continue to run the company's operations as usual. The two companies will, however, benefit from sharing intellectual capital across the entire corporation. There are no planned staff reductions or relocations.
"This transaction is good news for the employees and customers of Carlson Marketing and a great opportunity for Groupe Aeroplan," added Carlson Companies' president and CEO Hubert Joly. "It also frees up resources for Carlson so that the company can accelerate the growth of its hotel, restaurant, and travel businesses at a time when significant opportunities exist in these markets."
According to Groupe Aeroplan's CFO, David Adams, the deal is expected to be immediately accretive to adjusted net earnings and free cash flow per share because Carlson Marketing is expected to generate positive free cash flow. Carlson Marketing is expected to contribute more than Can$600 million in marketing fees, with expected EBITDA margins of 6% to 8% in 2010. In addition to diversifying the group's existing revenue base, Adams says the company expects to grow its consolidated top line by some 45% (to more than Can$2 billion).
Synergies sought A dedicated team, supported by external advisors, will be set up to explore all possible synergies between the two companies, and to identify potential collaborative initiatives to be rolled out over a period of 12 months.
In conducting the transaction, Deutsche Bank Securities and RBC Capital Markets have acted as financial advisors to Groupe Aeroplan, and Petsky Prunier Securities have acted as financial advisor to Carlson Companies.
Background Groupe Aeroplan is an international loyalty management provider, which owns the Canadian Aeroplan loyalty programme and the UK's Nectar coalition loyalty programme. In the Gulf Region, the company owns 60% of Rewards Management Middle East, the operator of Air Miles programmes in the United Arab Emirates, Qatar and Bahrain. Groupe Aeroplan also operates LMG Insight & Communication, a customer-driven insight and data analytics business offering services to retailers and suppliers globally.
The history of Carlson Marketing goes back to the roots of Carlson, which started as the Gold Bond Stamp Company in 1938. Today, Carlson Marketing designs and provides loyalty, engagement and event programmes for well-known brands, based on two global service offerings: brand loyalty, and engagement & events. Headquartered in Minneapolis, USA, the company has regional offices in Canada (Toronto), the UK (London), and Australia (Sydney).