TD Bank Group acquired half of CIBC's Aerogold card portfolio mainly to provide more card services for its customers and solidify its position as the top issuer in Canada, TD Bank CEO Ed Clark told investors Sept. 16 during a conference call.
Aimia Inc., which operates the Aeroplan credit card loyalty program for travelers, was the important third wheel in the deal. It also may have gained the most, considering it will now have two banks issuing its branded cards.
CIBC had been the main issuer of Aeroplan cards for more than 20 years, but had failed to reach an agreement with Aimia to extend the partnership, which expired on Dec. 31, according to a Reuters report.
Subsequently, TD Bank reached an agreement with Aimia last month to become the main issuer of the popular travel cards.
During the conference call, Michael Goldberg, vice president at Desjardins Securities, suggested that TD Bank may have agreed to negotiate and compensate CIBC as part of the three-way deal because it overlooked the fact that CIBC had the option to match TD's deal with Aimia, or that Aimia was possibly not clear on all of the details of its previous deal with CIBC. It was known that CIBC was considering its legal options, Goldberg said.
Clark downplayed such a notion. "My answer would be no to all of your suppositions," Clark said. "We had a terrific deal with Aimia, but we went to this [three-way deal] because it was a better deal for us."
A key factor for TD Bank is that it "preserved the future" by obtaining exclusive marketing rights to the travel card in the future, Clark said.
"I am not getting into the [potential] legal thing, but we were not worried about legal issues at all," he added.
TD Bank will acquire 550,000 cardholder accounts in the deal representing about $3 billion in card balances and $20 billion in annual retail spending, according to Colleen Johnston, chief financial officer for TD Bank. In addition to up-front costs, the bank has agreed to pay CIBC $37.5 million annually for three years, Johnston added.
The companies had been negotiating since last month, when Montreal-based Aimia chose TD as its primary card partner. Under its 10-year contract with Aimia, TD will offer a variety of co-branded Aeroplan Visa credit cards starting in January that offer miles for flights and other rewards.
Aeroplan began in 1984 as a promotional tool for business travelers on Air Canada. CIBC Aerogold Visa was started in 1991.