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Aimia sells Nectar loyalty program and related assets to Sainsbury’s

Published 06 February 2018

Aimia, a data-driven marketing and loyalty analytics company, has sold its Nectar loyalty program and related assets to J Sainsbury for about $105m.

Sainsbury’s was a founding partner of the Nectar coalition in 2002. Today, the Sainsbury’s group reaches across grocery, financial services, energy, clothing, and general merchandise.

With that diversification, Sainsbury’s now covers many of the key categories for a typical retail coalition and is Nectar’s largest issuance and redemption partner.

The evolution of the Sainsbury’s group has led to more limited prospects for Nectar to add new non-competitive partners of scale. When combined with the takeover of partner Homebase by Bunnings and the exit of British Gas, Aimia ultimately determined that retaining its ownership of the Nectar business offered more limited opportunities to add value to the company and the parties mutually agreed to pursue a sale of the business to Sainsbury’s.

Aimia Group CEO David Johnston said: “Selling the Nectar business to Sainsbury’s was the optimal risk-adjusted outcome for Aimia and we have worked to ensure a seamless transition for collectors and employees.

“The transaction allows for a sharper focus on Aeroplan, our largest and most profitable business, and simplifies our business all the while preserving a robust balance sheet for our ongoing business.”

Along with the sale of Nectar business and Aimia’s Intelligent Shopper Solutions U.K. and Intelligent Research businesses, and a 50% equity stake in its i2c joint venture with Sainsbury’s, the agreement also provides for the transfer to Sainsbury’s of approximately $183 million (£105 million) of cash providing coverage against the Nectar redemption liability.

Aimia will continue to deliver customer insights and data analytics platforms to customers outside the U.K.

The transaction is also subject to customary working capital adjustments based on closing accounts, with net working capital amounts paid to Sainsbury’s at closing of approximately $96 million (£55 million). 

Included in this amount are net payables in respect of December redemptions normally paid in the first quarter of the year.

Aimia also obtained the consent of its lenders, as required for the release of one of Aimia’s subsidiary guarantors under its senior credit agreement. In connection with this consent, Aimia has reduced its overall debt level with a $100 million repayment made at closing and the overall size of the facility has been reduced to $208 million.

In addition, Aimia has agreed to certain amendments to the credit agreement which include amendments in respect of quarterly debt paydowns contingent on positive free cash flow performance, working capital requirements for new borrowings, elimination of the Deferred Revenue Reserve (DRR) Fund alongside insertion of a minimum liquidity covenant, lower leverage covenants, tighter restrictions on common and preferred share dividend payments and revised conditions around acquisitions and disposals.

As at September 30, 2017, Aimia had close to $670 million of cash and cash equivalents (including investments in corporate and government bonds). Adjusting for and giving effect to the Nectar transaction, Aimia’s net cash and liquidity position will be reduced by approximately $174 million.

As the contractual requirement with Sainsbury’s under which approximately $208 million (at September 30, 2017) had previously been held in reserve by Aimia no longer applies, Aimia views the impact of the Nectar transaction as having a positive impact on Aimia’s net cash position prior to giving effect to the repayment of $100 million under its credit facility and any positive cash inflows generated by the Nectar business in the fourth quarter.

The businesses being sold today will be presented as discontinued operations in the financial statements and accompanying MD&A for the year ended December 31, 2017. Divisional 2017 results, along with 2016 comparatives, and 2018 guidance are expected to be provided with the company’s results for the year ended December 31, 2017, to be issued after the TSX market close on February 14, 2018.

RBC Capital Markets acted as financial advisor to Aimia in relation to the Nectar transaction.

Source: Company Press Release