Mithaq Files Proxy Circular and Sends Letter to Aimia Shareholders
Mithaq has ownership of, or control or direction over, a total of 26,893,588 common shares of
Mithaq encourages
FOR the election of all six of the Mithaq Nominees:
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√ Muhammad Asif Seemab
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FOR the election of the following management nominee:
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WITHOLD in respect of the election of the following six management nominees:
×
×
×
×
×
×
FOR
the reappointment of
AGAINST
acceptance of
Based on
Shareholders who have questions or are willing to express their support for the Mithaq Nominees but require assistance in doing so may contact Mithaq's proxy solicitor,
ENSURING A FAIR AND PROPER VOTE AT THE MEETING
Mithaq is taking action to protect all shareholders by attempting to ensure the sorts of serious irregularities that took place at the 2023 annual general meeting (the "2023 Meeting") cannot reoccur. As previously disclosed, Mithaq has obtained evidence that
The problematic behaviour uncovered by Mithaq is unacceptable and will not be tolerated at the Meeting. Mithaq expects that the Meeting be conducted in accordance with applicable corporate and securities laws and that
In particular, Mithaq has formally requested
LETTER TO AIMIA SHAREHOLDERS
Mithaq also released a letter to
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To the Shareholders of
Despite the Board's recent attempts to entrench itself through dilutive share issuances, we are still the largest shareholder of
We began acquiring our position in early 2020 and we continue to have faith that we can protect, unlock and create long-term value at the Company. In deciding how to vote at the upcoming Meeting, we believe that
We hope this letter will help you to understand why we have lost trust in the current Board and management and why we have decided to nominate our own slate of directors (the "Mithaq Nominees") for election to the Board at the Meeting. Further information about the Mithaq Nominees can be found in the accompanying information circular.
A Disappointing State of Affairs
We were initially attracted to
During 2021, we increased our position and began engaging with
In 2022,
After receiving the PLM proceeds, during the Q2 2022 earnings call,
While we were supportive of these initiatives, none of them ever materialized;
As responsible stewards of our capital, we performed due diligence on Tufropes based on publicly available information, including historical financial statements and corporate filings, and export shipment data available through service providers. Upon completing our due diligence, we had serious concerns about the transaction, including that the valuation multiple that
Unfortunately, time proved that our concerns about Tufropes were well-founded. Acquiring a 100% equity stake in a company operating thousands of miles away without a management team that has skin in the game was a gross investment blunder. When acquiring companies, our hero, Mr.
With
In the last nine months alone,
"You can't make a good deal with a bad person." –
The Board's increasingly worrying tactics are nothing more than an attempt to intimidate, divide and silence its shareholders. The Board as currently constituted is both unwilling and incapable of acting in the best interests of
- a lack of ownership and the resulting lack of alignment with shareholder interests;
- a track record of weak capital allocation decisions and acquisitions;
- a compensation structure that rewards management for failure; and
- a misaligned and value-destructive investment strategy.
Mistake after Mistake after Mistake
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Aimia acquiredMittleman Investment Management ("MIM") inApril 2020 . According toAimia's public filings,Aimia paid$16.4 million in cash and shares for MIM. The result? In 2023, MIM was shut down and the investment, representing 6% ofAimia's current market capitalization, was written off. Before it was written off, however,Aimia was able to use the Shares held by MIM to vote in favor of the incumbent Board at the 2023 AGM, ensuring that control was maintained at the expense of shareholders. - Between July and
December 2021 , the Board agreed to invest$75.6 million into TradeX. InDecember 2023 , TradeX entered receivership, renderingAimia's investment in TradeX worthless. The$75.6 million investment represents approximately 27% ofAimia's market capitalization today. - In 2023, the Board initiated legal proceedings against significant shareholders, including Mithaq. The current Board maintains its legal action against us in its bid to retain control at all costs, including at the direct expense of shareholders.
Aimia spent over$8 million in 2023 pursuing shareholders who had the best interests of the Company at heart. -
Aimia acquired Tufropes, an Indian ropes manufacturer and exporter inMarch 2023 . As noted above, we warned at the time thatAimia was paying full price or even overpaying for this asset and believed better value could be found in North American companies, both public and private.Aimia then acquiredCortland International , another ropes business. Results have proved our concerns were valid. At the investor day inSeptember 2023 , management indicated expected EBITDA from Tufropes of between$16 and 17 million. WhenAimia finally released its 2023 annual results, the combinedTufropes and Cortland International businesses' actual EBITDA was$11 million . This means that the Board agreed to acquire a rope manufacturer inIndia for over 20x 2023 EBITDA, double the 10.7x they estimated at the time of the acquisition. -
Aimia acquired bothTufropes and Bozzetto Group through seeding Paladin. One of the partners of Paladin until his recent departure was the son of one of the investors in the 2023 private placement described further below. Under normal circumstances,Aimia would have augmented its return by taking a stake in Paladin and yetAimia received nothing. It seems from publicly available information about Paladin thatAimia's transactions are its only deals. Why didAimia need Paladin and how much did it cost shareholders? -
Aimia spent$40 million on fees in 2023 (14% of its current market capitalization) and a further$8.7 million on costs to entrench itself in opposition to its largest shareholders, including Mithaq. Combined, that's nearly$50 million of costs, representing over 17% ofAimia's market capitalization, in one year. -
Aimia raised$32.4 million through an unnecessary, dilutive private placement. At the time, we had made an offer to shareholders to acquire all of their Shares for$3.66 per Share and yet the Board decided to raise capital in a private placement open to only an exclusive few investors at a price of$3.10 per Share, a price that represented a significant discount to the trading price at the time, particularly when the value of warrants issued as part of the private placement described below are taken into account. Who benefited from this discounted price? Among others, the current Executive Chairman subscribed for part of the issuance, which represented approximately 10% of the currently outstanding Shares. - On top of the private placement Shares issued at
$3.10 ,Aimia further diluted the interests of current shareholders by issuing five-year warrants at an exercise price of$3.70 , at no cost to subscribers. Again, the current Executive Chairman and parties close to him stand to benefit from these warrants. While the value of the warrants is difficult to calculate, our financial expert concluded that the implied consideration received byAimia per Share in the private placement, after taking into account the issuance of the warrants, was between$1.76 and$2.12 depending on the valuation date, representing a discount to the offer price of between 42% and 52%. These warrants give the holders the right to buy Shares representing approximately 10% of the currently outstanding Shares. -
Aimia issued over 5 million Shares to Paladin at a price of$2.50 per Share, representing a discount of approximately 57% to reported net asset value ("NAV") at the time and being only 6% above the three-year trading low. These Shares were issued shortly before the record date for the Meeting and, only two weeks later,Aimia announced a normal course issuer bid to repurchase up to seven million Shares. While the Board has sought to justify these two actions independently, the net result will be an increase in outstanding Shares held by Board-friendly parties for the exact period required to vote them at the Meeting at the expense of shareholders who will once again lose value through both dilution and fees. - The recent circular filed by
Aimia's management includes a promise to launch a share buyback. Of course, we support that strategy. However, this is not the first time that theAimia has promised a buyback. OnSeptember 27, 2023 , one of the two priorities put forward byAimia was to implement share buybacks. Have they delivered on that priority? At the time,Aimia had approximately 84 million shares outstanding and the promised share buybacks should have reduced that number. Today, almost nine months later,Aimia has 99 million Shares outstanding. Instead of delivering on its promises, the Board members have, as usual, sought to entrench themselves in seats they do not deserve to hold by issuing 15 million additional shares to friendly parties.
In addition to the ongoing value destruction, the Board has a history of concerning disclosures and governance practices, including most recently:
- Refusing to provide adequate disclosure to shareholders of the process undertaken by the Board and any special committee in negotiating the termination of
Aimia's agreements with Paladin, a related party ofAimia . - Unnecessarily delaying the calling of the Meeting such that the record date fell after the issuance of 5,040,000 Shares to Paladin, presumably with the objective of increasing the Board's likelihood of re-election.
- For the second year in a row, engaging in the highly unusual and undemocratic practice of abridging the usual period between providing notice of and holding an AGM, and failing to provide the amount of notice required under corporate law.
- Failing to timely disclose the departure of
Karen Basian , the lead independent director and chair of the audit committee, from the Board other than by removing her profile fromAimia's website.
Our view, which we believe is reflected in the current share price, is that shareholders have had enough.
A Reliable Fiduciary of Shareholders' Wealth
It is time for a new Board with business acumen and ethical standards to clean up the mess that's been created and realize the full value of
- Get to work for all shareholders to achieve the best possible outcomes immediately after the Meeting.
- Choose to maximize returns for shareholders and harvest all excess capital from any low-return businesses to deploy it in high-quality, high-return businesses. Aimia will be opportunistic and, depending on the market environment, will diversify its investments in public equities and private equity.
- Reclaim and reverse prior transactions where possible. This will involve pursuing those who have disadvantaged other shareholders for their own enrichment. Aimia will conduct a comprehensive review of amounts paid to advisors (thus far undisclosed) who benefited from the millions of dollars paid in fees in 2023.
- Run Aimia with minimal overhead.
Aimia's current overhead is approximately$15 million annually and the Company has 18 employees. If Berkshire Hathaway can manageUS$1 trillion with less than 30 employees, thenAimia can manage its$500 million portfolio with fewer employees. - Rationalize assets allowing shareholders to calculate a reliable NAV. We would also maintain a permanent opportunistic Share buyback program to keep the Share price closer to NAV.
- Immediately seek to unlock value by exploring partial and full asset sales where public and private markets provide the opportunity. Nothing will be sacred as the reconstituted Board will act without nostalgia for prior investment decisions that have destroyed value.
- Seek to optimize investment decisions to utilize Aimia's net operating losses ("NOLs") and hunt for operating businesses with first-class management teams that will retain significant equity ownership. The utilization of NOLs will never be the sole driver for an investment decision, but it will be one consideration among many.
- As available capital allows, the reconstituted Board will consider opportunistically buying back Aimia's preferred debt, which currently yields over 9%.
- Cease wasteful spending on external advisors, reduce the Company's audit fee expense (which has grown from
$700,000 in 2022 to$2.7 million in 2023) and work rigorously to keep non-core fees and expenses to reasonable levels. - Most importantly, the newly reconstituted Board will govern Aimia with unshakable reliability and integrity. These two simple yet powerful traits should reward long-suffering
Aimia shareholders, including us, who have had to swallow the consequences of the Board's mistakes and self-interested behavior.
Your Support is Required
Shareholders have a decision to make about the fate of
Shareholders who have questions or who are willing to express their support for the Mithaq Nominees but require assistance in doing so may contact our proxy solicitor,
Cordially,
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ADDITIONAL INFORMATION
The following disclosure is provided pursuant to the Canada Business Corporations Act and section 9.2(4) of National Instrument 51-102 – Continuous Disclosure Obligations in accordance with corporate and securities laws applicable to public broadcast solicitations.
This news release and any solicitation made by Mithaq in advance of the Meeting is, or will be, as applicable, made by Mithaq, and not by or on behalf of the management of
Proxies may be solicited by Mithaq pursuant to the Mithaq Circular sent to
Mithaq has retained
Proxies may be revoked by instrument in writing by the shareholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted under corporate and securities laws. Except as disclosed in this press release, none of Mithaq or, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect, (i) in any transaction since the beginning of
ADVISORS
Mithaq has retained
ABOUT MITHAQ
Mithaq is a segregated portfolio company and affiliate of
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document contains "forward-looking statements" (as defined under applicable securities laws). These statements relate to future events or future performance and reflect Mithaq's expectations, beliefs, plans, estimates, intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements include, but are not limited to, statements in respect of the objectives of Mithaq as they relate to
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and a number of factors could cause actual events or results to differ materially from the results discussed in the forward-looking statements. In evaluating these statements, readers should specifically consider various factors that may cause actual results to differ materially from any forward-looking statement. These factors include, but are not limited to,
Although the forward-looking information contained in this document is based upon what Mithaq believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. The forward-looking statements contained in this document are made as of the date of this document and should not be relied upon as representing views as of any date subsequent to the date of this document. Except as may be required by applicable law, Mithaq does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking information, whether as a result of new information, further developments or otherwise.
Neither Mithaq nor or any of its subsidiaries, affiliates, associates, officers, partners, employees, representatives and advisers make any representation or warranty, express or implied, as to the fairness, truth, fullness, accuracy or completeness of the information contained in this document or otherwise made available, nor as to the reasonableness of any assumption contained herein, and any liability therefore (including in respect of direct, indirect, consequential loss or damage) is expressly disclaimed. Nothing contained herein is, or shall be relied upon as, a promise or representation, whether as to the past or the future and no reliance, in whole or in part, should be placed on the fairness, accuracy, completeness or correctness of the information contained herein.
SOURCE Mithaq Capital SPC