Published: 05 Dec 2007

Aeroplan said the deal, which should close by the end of the year, is expected to be modestly accretive to distributable cash in 2008.

Including working capital adjustments of C$36.9 million, the purchase is worth a total of C$754.4 million.

Rupert Duchesne, CEO, Aeroplan Income Fund, described the cash and debt deal as the "first global loyalty industry play" and a taste of things to come.

"We, Aeroplan, are entering the next phase of our business cycle, which is to become that global leader in loyalty management," Duchesne told media.

Post this development, Aeroplan Income Fund has set its sights on global expansion after making its first foreign investment with a $755-million deal for Britain's largest customer loyalty programme.

"During the course of 2008, you'll see some other significant moves from us," Duchesne reportedly said. "We'll be entering new markets. You hear about the hollowing out of Canada and Canadian companies not doing well on the international stage, but this is the opposite happening and it's kind of cool."

Duchesne said Loyalty Management is an ideal first acquisition for Aeroplan since its Nectar loyalty program operates in a familiar market and counts roughly 50% of UK households as customers. Nectar's commercial partners are mostly retailers, creating an opportunity for Aeroplan to leverage its expertise in the air travel sector in one of Europe's busiest aviation markets.

Aeroplan and Nectar will operate as separate entities, but they will share "intellectual capital" as executives find ways to help each other in their home markets.

As per the information available, LMG is 46% owned by chairman Sir Keith Mills, while private-equity investor Warburg Pincus has 33% and a management team owns the balance. Alex Moorhead will continue to run LMG and the Nectar and Aeroplan loyalty programs will remain separate.

While Loyalty Management owns the rights to the Air Miles brand name in Canada and other countries, Aeroplan officials said the amount of money earned in royalties was a "tiny percentage" of overall revenue and that there would be no business relationship between the two Canadian loyalty programme competitors, according to reports.