TD may become primary credit card issuer for Aeroplan

TD Bank Group and Aimia today announced that they have entered into a conditional program agreement under which TD would become the primary credit card issuer for Aeroplan, a loyalty program owned by Aimia, starting on January 1, 2014, subject to a contractual right to match the same terms by Aeroplan’s current primary credit card issuer. The right to match period expires on August 9, 2013.

Read: TD snaps up Epoch Holding Corporation

TD expects that, as structured, the agreement would not have a material impact on 2014 earnings and would make a solid contribution to 2015 earnings. As part of the agreement, TD would make a $100 million upfront payment and commit to minimum annual miles purchases for the first three years.

While TD currently expects to exceed its annual miles purchases commitment, in case of any shortfall below its commitment levels, TD would make a payment to compensate Aimia for the gross margin on the shortfall. The agreement contemplates a joint marketing spend by TD and Aimia of around $140 million in the first four years to support the new cards and program features.

Read: Entitlement reform key to recovery: TD economist

If Aeroplan’s incumbent credit card issuer exercises its contractual right to match the same terms on or before August 9, 2013, TD is entitled to receive a break fee of $80 million to cover transaction expenses.

Under the agreement, TD would offer a new suite of cards beginning in 2014, as announced by Aimia in a news release today. The suite will include enhanced premium, premium and mid-market cards, along with a card for Canadian small business owners and a card for customers travelling frequently between Canada and the U.S.

Read: TD recognizes leaders of tomorrow

CIBC has issued a press release that states in part:

“In keeping with our contractual rights including our right of first refusal as the incumbent issuer, and notwithstanding that the notice provided by Aimia has been presented in a way that is inconsistent with our understanding of our rights, we are in the process of reviewing the proposed terms provided by Aimia to see if our objective can be achieved through a renewal of our agreement.”

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.