OEP Capital Advisors L.P. (AIM) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to Aimia's investor conference call. [Operator Instructions] This call is being recorded on Monday, February 9, 2026. I would now like to turn the conference over to Joe Racanelli, please go ahead.

Good morning, and thank you for joining us today. Earlier this morning, we announced the signing a definitive agreement for the sale of Bozzetto. We want to take this opportunity to put the transaction into perspective, review upcoming time lines and answer any questions that you may have about the sale and our planned use of proceeds. Joining me on today's call are Aimia's Executive Chairman, Rhys Summerton; and Aimia's President and CFO, Steven Leonard. Before I begin, I do want to point out a couple of items. We will be using the presentation today. And for those who are listening by phone, a copy of that presentation is available from the IR section of our website. Some of the statements that made on today's call may constitute forward-looking information, and our future results may differ materially from what we discuss. Please refer to the risks and uncertainties that may affect our future performance referenced in our presentation. Following today's presentation, please reach out if you do have any outstanding questions or require clarification on any of the matters discussed today. With that, I'd like to turn the call over now to Rhys. Please go ahead, Rhys.

Yes, thank you, Joe. Good morning, afternoon, everyone. I thought you would have this call to just provide an update after the news of the sale of Bozzetto. If you take a step back, I think it was in the second quarter '25 were we came across Aimia and got involved, and we rolled out this 3-step strategy, which you'll see on Slide 4. If you recall, the first step was reducing the holdco costs to below 1.5% of Aimia's NAV, then we would work at reducing the discount that the share price traded at relative to the intrinsic value of Aimia. And then the third and probably the most value-accretive step is deploying the capital so that we could utilize the extensive tax losses that we carry at Aimia. So that's where we're going. We've been pretty clear about that from the start. And I think we've made progress on all fronts. To put that into perspective, we've been able to cut costs at the holdco level, probably around low double digits already close to $1 million has come off there, and there's still more work to do, making that more efficient, but we are heading in the right direction, and Steve's done very good work on that. We've been able to buy back CAD 3 million worth of shares through NCIB and we've done a lot of work in determining what we referred to as obtaining the market value on our core holdings. And I think the sale of Bozzetto represents a clear sign of progress towards turning Aimia into the vehicle that it -- or it should have been -- should be a remarkable permanent capital allocator and we should be able to start using the tax losses going forward. So we think we've been executing on the strategy well. We'll continue to do that. We understand that there's a lot more work to do. On the next slide, we take you through the transaction highlights, which is on Slide 5. Bozzetto, the sale will generate proceeds in the range of CAD 265 million to CAD 271 million at the close. And we will anticipate that the close happens within the next 3 months. So as mentioned, we expect to use the proceeds towards making investments in other companies and also importantly, reducing the indebtedness at the holdco level of Aimia which should point out that with more than $500 million of capital tax carryforwards and at the end of September 30, we do not anticipate paying any taxes on the gain from this transaction. So we will start utilizing it a little bit in this transaction. And this transaction is the culmination of an extensive sales process, which we've embarked on, and we are very satisfied with the results of that. Going on to Slide 6. The question might be why sell Bozzetto? And given that it's a consistent deliverer of financial results since Aimia has owned it over the last 2 years, it's a fair question. But the rationale becomes clear when we look at some of the limitations to owning Bozzetto. First, we believe that monetizing the assets and redeploying the proceeds to reduce indebtedness and acquire other companies, which are even more undervalued, offers a really compelling opportunity to maximize shareholder value. Also, due to its geographic location of Bozzetto's operations and the markets it serves, we were not able to utilize more than $520 million of net operating losses against taxable income that Aimia has. And so we want to get to the position over the next couple of years where we can start utilizing those tax losses. And then equally significant, the structure of Bozzetto's credit facilities limited our ability to upstream cash flow. As a result of our ability to deploy capital, whether to continue with share buybacks or make investments in other operating companies was limited. So if you combine all those factors, you come to the conclusion that this deal is actually in the best interest of Aimia shareholders and also gets us moving towards unlocking the long-term potential that's within Aimia. So we think this is a good deal. It helps to accelerate our strategy. And we think that we will get to the point where we can really unlock the full potential of Aimia going forward. And this is one of those steps in realizing that ambition. We're now going to hand over to Steve, who will take us through more of the details.

Thank you, Rhys, and good morning, everyone. Slide 7 illustrates a cash waterfall of the main transaction components. The amounts presented have been converted into Canadian dollars, our reporting currency. I should point out the definitive purchase agreement is based in euros. As a result, the Canadian dollar proceeds are subject to change depending on currency rates at closing. It's for this reason, we are exploring currency hedging options. The net proceeds presented in the waterfall chart are the midpoint of the range we estimate at the transaction close. I should point out that they are subject to closing adjustments on net debt and working capital. As you can see, Bozzetto is valued at an enterprise value of $411 million or EUR 255 million, less its net debt of $117 million and minority interest of $16.5 million and transaction costs of just under $10 million, the sale of Bozzetto will generate net proceeds in the range of CAD 265 million to CAD 271 million. If you recall, we acquired Bozzetto on an enterprise value of EUR 227 million, and we are selling it based on the SPA, the closing conditions of enterprise value of EUR 250 million. Over to Slide 8. Looking ahead, we anticipate the transaction to close within the next 3 months, as we said earlier, subject to customary closing conditions, including regulatory approvals. Within 30 days following the transaction close, we will be making an offer to purchase our senior notes. The purchase offers the requirement of our indentured agreement as triggered by the Bozzetto sale. The offer to noteholders will be made at par value of the notes plus any accrued interest up until closing. At December 31, we had $142.6 million of outstanding senior notes. And holders will retain the option to hold the notes until the maturity in January 2030. Following the transaction close, we will also begin to deploy our net proceeds towards acquiring controlling interest in operating companies. We have identified a number of target companies but I will not share any further details at this time. What I can say is the companies we will be targeting must provide an opportunity to acquire a controlling interest, generate strong operating cash flows, have solid balance sheets and be undervalued relative to their peers. Moving on to Slide 9. Another important consideration when looking at the benefits of this transaction relates to the financial impact of the early redemption of the senior notes. These notes are bearing a high interest rate of 9.75% and consume $13.9 million of cash annually. The early redemption will result in cumulative cash savings to maturity in 2030 of approximately $51 million. It's worth remembering that we generated a gain of $53.8 million on the -- an annual cash savings of more than $5 million when we completed our substantial issuer bid last year where we exchanged our preferred shares at the discount to their face value on the senior notes. That concludes my remarks. I would now like to turn it back -- the call back to Rhys for closing comments.

Thank Steve, as you have heard, the sale of Bozzetto marks a very important development in our goal of enhancing shareholder value in Aimia and turning Aimia into the permanent capital vehicle that we have spoken about previously. We're excited about the path ahead. There's lots of opportunities around, and this allows us to execute on that strategy of looking for more undervalued companies and deploying the capital in an accretive way. It will take some time for us to get there. We have a number of different ideas that are coming across at the moment. We will be in touch with shareholders and communicate clearly when we have anything to update the market on. But I think the point we want to make about this transaction is that Aimia now has extensive amount of cash at the center. It has very little debt once this transaction has concluded. It's got over $1 billion of tax losses carried forward, and we have strong alignment between the Board and shareholders and we have the opportunity to execute on a number of opportunities, which are before us. And we will report on the progress to you. So with that, we will hand over to Joe for questions.

Operator, if you can provide polling instructions. We do have a number of individuals on the line. We'll go through those first reason and have got a number of inbound e-mails that as well we'll go through. So operator, please.

[Operator Instructions] Your first question comes from Brian Morrison with TD Cowen.

Just start out with a couple of housekeeping questions, Steve. So I just want to understand the transaction valuation. Is it $411 million of EV and about $60 million of trailing EBITDA, so will be a little under 7x?

Yes, Brian, you need to look at depending on whether we're referring trailing or where we're going to come out in '25 with reported on Bozzetto, but there's a couple of items you need to take into consideration counting the multiple. One is on the minority interest we had with the Honduras business. That's about CAD 2.5 million of the Canadian of the EBITDA that we're reporting on an annual basis. And then there's also the EBITDA that we report is on an IFRS basis, and there's about $1 million and change of lease expense that's below the EBITDA line. But yes, you're close. We're in the 6.5% to 7% range depending on whether you're looking at trailing or '25 EBITDA numbers.

Okay. And then the second housekeeping item I have for you is the cash balance pro forma at the holdco. So I just want to make sure I have it correct. You have $106 million that you disclosed at the end of Q3, less the $47 million at Bozzetto. You get net proceeds of $268 million. You repay notes hopefully at about $140 million pro forma is approximately $185 million of net cash, and I understand it would include some Cortland cash, but is that the correct numbers?

Yes, I think -- sorry, Brian, I'll jump in there. I think that's in the ballpark, yes.

Okay. And Rhys, while I have you then, just what does this imply for the potential timing or sale of a transaction with Cortland to the extent that you might be able to comment on that?

That's a very good question. So I think since I've been involved in Aimia as the Executive Chairman, I've got to know Cortland Tufropes a lot better from the inside, as you would imagine. And I can tell you, I'm quite optimistic about that business. And not only in the short term, so for 2026, but I'm pretty optimistic about it into the long term and what we can do with it. I think there's a lot of ideas that could create extensive value. We'll report more about that probably at the time of our results. But I don't think there's any rush for us to sell it. Now clearly, if we do receive interest and as I said before, I think there has been interest in all our assets. But if anything had to come across that would generate value that I would say is useful for unlocking value across the group, I think we would look at it. But I think in the long term, we can actually do something pretty positive with Cortland. And I'm feeling a lot more comfortable with that asset now, but we'll report on that at our results.

Okay. And then the last question I have for me is maybe just with respect now that you have substantial fast resources on your balance sheet. Maybe just an update with respect to the investment opportunities that you're pursuing from a geographic standpoint and/or a segment perspective. The markets have had a heck of a run here and you're trying to find undervalued assets. Maybe you could just give us some color as to what you're looking at.

Yes, that's a good question. There's lots of value in the U.K. Let's just be clear, there's value in companies that are very basic businesses that are not impacted by technology disruption that have lots of cash on the balance sheet and good management teams. Where those are, there seems to a lot in the U.K. We have come across 1 or 2 things that are in Canada that look attractive. But I think when I look at the U.S. markets, I struggle to find the same kind of attraction to those businesses. They all seem to be carrying too much debt. And the valuations, as you say, are pretty high. But we are finding things in the U.K. potentially Canada. And then the other point is what we see is that in public markets, there are companies that might be listed in a certain market that have exposure to other markets that are very attractive. And so we want to take advantage of those mispricings as well. But really, I underline the point, what we want is to buy companies that are going to enhance the cash that we have at the center. So you talk about how much cash we have and I think your number is in the ballpark. What we want to do is make acquisitions and actually drive up that cash balance. And as we do that, it will put us in a very strong position to be able to buy things that will utilize the tax losses that we carry at Aimia. So that's kind of the strategy. It's going to take a little while to get there. But I got no doubt we will get there, probably take 18 months, 2 years before we can really be executing on that. And that's what makes the notes so interesting. We can deploy this cash immediately into tendering for the notes and save ourselves 9.75% a year. So I'm not quite sure why the noteholders will sell, but they will. And I think that's going to be a very good use of our cash right off the bat.

Sure. And just to be clear, though, potential opportunities in the U.K., can you allocate your net capital losses with those investments or no?

Not yet. But remember, you've got to think of it in stages. So any acquisitions that we look at will enhance the cash at the center of Aimia. So that will build up our cash balance. And then we'll be able to utilize the tax losses in Canada and the U.S.

Brian, on that point, in your Q3 -- or Q2, I should say, no Q3 presentation, we walked through our tax loss carryforwards. I'll resend on the presentation and the full breakdown to give you an indication of maturity dates and the amounts that we have outstanding. And I will give you some comfort Oncoral where we're going with the use of those tax loss carryforwards. Rhys, we have a couple of questions that have come in. Rhys, if you wouldn't mind, first off, if you can provide some context what happens next with Cortland? Does it stay within your group of holdings?

Yes. I think I spoke to that with Brian, but to go through that again, I like Cortland. I think there's a lot of opportunity for us to grow that business. If the opportunity does present itself to monetize it, we will look at it as we have in the past. But I'm feeling a lot more optimistic about that, having looked at it from the inside than I was before looking at from the outside. So for now, we're happy with it. We see the potential to grow it. But we don't exclude the chance that we might monetize it at some point in the future.

And related to that, what happens to Aimia's investment in Clear Media?

Sorry, Joe, I didn't hear you.

What happens to Aimia's investment in Clear Media?

Yes. I think we'll update the market on that when we release results. You'll see the performance of that. I think we'll elaborate on that a little bit more. But there's no plans right now to exit that asset.

Okay. Is there any consideration to try and extend the maturity of your notes so that you don't have to deploy all your capital towards the redemption of them?

At 9.75% for -- that we're paying while we're carrying a big cash balance. I don't think we -- I mean, it's up to noteholders, obviously, but we're going to make the offer and we hope that we're able to buy back all the notes.

And as you work through the time line, you basically indicated you've got 3 months with respect to the closing and then 30 days thereafter for the close of the offering for the notes. Should we assume that any investments will only happen after that? Or is that going to be a situation where you can run those activities concurrently?

Yes. So the way we're going to deploy capital and grow Aimia going forward, there will be 2 parts to it. The one part will be ensuring that the opportunities exist. So at the moment, we see opportunities theoretically, but to execute on that, will take some time. And so I would imagine, although we can run it concurrently, the reality is it will probably most likely be after the dotes are settled, and we've received -- obviously received the proceeds of Bozzetto.

That's about it, Rhys, in terms of inbounds from e-mails. Operator, why don't we pull once again for those on our line? Okay. It doesn't look like there's any other questions. For anybody who does have any follow-on, please reach out to me. We'd be happy to schedule some additional time with you. And again, thank you, everyone, for participating on short notice on today's call. Have a good day, everyone.