The fortunes of Groupe Aeroplan Inc. won't be tied to the wrenching ups and downs of Air Canada any more.
Eighteen months after fully severing the apron strings from the airline's parent company, Aeroplan is taking a major step toward reducing its exposure to the performance of its core clients by purchasing a leading U.S.-based loyalty management company that operates in 14 countries.
Aeroplan's $175.3-million (U.S.) acquisition of the privately held Carlson Marketing will increase the Canadian company's annual revenue by approximately 45 per cent, to more than $2-billion. Aeroplan's top three clients - Canadian Imperial Bank of Commerce, Air Canada and the U.K. grocery chain Sainsbury's - currently account for about 75 per cent of its revenue. If the Carlson acquisition closes as expected early next month, that number will drop to about 55 per cent.
Carlson says it runs stem-to-stern loyalty programs for hundreds of customers in the financial services, automotive, high-tech, consumer packaged goods and pharmaceutical industries. While its client list is secret, and it has no retail presence, Carlson president and chief executive officer Jeff Balagna says its Canadian division currently operates many widely recognized loyalty programs, including some of Aeroplan's competitors.
The merged companies will be run as separate businesses.
In recent years, Aeroplan has moved into the U.K. and the Middle East, and next year it will launch a loyalty program in Italy, but for Aeroplan CEO Rupert Duchesne, the expansion into the U.S. represents the realization of a long-held dream. "It is the biggest consumer market in the world, so the idea that we would be a global company without a presence in the U.S. was a non-starter, but also it is the breeding ground for a lot of innovation in the marketing space."
Aeroplan had looked at numerous options over the years to get into the U.S., including investments in popular frequent-flier programs, or cobbling together its own collection of loyalty businesses, but Mr. Duchesne says none would have given it the depth and breadth of pairing up with Carlson. "It is a much lower-risk, higher-profile, better way of getting into the market than anything else we could come up with."
Aeroplan, which is financing the bulk of the purchase with cash on hand, has not ruled out a share buyback next year.
Groupe Aeroplan (AER-T)
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