BMO agrees to buy Air Miles loyalty program

The latest:

• BMO Financial Group aiming to buy Air Miles.
• U.S. parent company of Air Miles seekingprotection from creditors.
• The deal won't impact customers' points balances.

BMO Financial Group has signed a deal to acquire the Air Miles rewards program from LoyaltyOne Co., which has gone into bankruptcy protection.

In a mediarelease, Air Miles president Shawn Stewart says the deal will have no impact on the points balances of the program's 10 million customers, or on their ability to use their miles to pay for items.

BMO, a founding partner of Air Miles since 1992, said the proposed $160-million USdeal would accelerate the loyalty program's future growth.

"If our acquisition of the Air Miles business is successful, we will bring the ownership of Air Miles home to Canada and strengthen its offering for Canadian consumers and businesses together," Ernie Johannson, BMO's group head of North American personal and business banking, said in a statement.

The bank is approaching Air Miles with a "long-term perspective, not a short-term tactical" approach that a holding company based in another country might take, she said.

With a holding company "there isn't necessarily the same belief in the program," said Johannson, who by chance started her career 30 years ago with Air Miles. "We want to run it like an entity and be able to fund it, grow it and inspire it."

Parent company seeking protection

The transaction is happening because Air Miles' U.S. parent company, LoyaltyVentures, is seeking court protection from its creditors in the U.S. and Canada.

In U.S. court filings, LoyaltyVentures says it has assets of about $10 million, against liabilities of up to $1 billion. At the end of 2021, the company's shares were worth more than $700 million US, but by the end of its most recently completed quarter, that had fallento just $29 million.

As part of the bankruptcy proceedings, Loyalty's shares on the Nasdaqthatcurrently trade under the LYLT symbol will be delisted.

Air Miles was once one of the biggest names in the loyalty space, but the company has seen its popularity slowly erode in recent years.

The company's problems first started in 2016, when it ostracized members by announcing that unused points would expire. That was wildly unpopular with members who had diligently saved their points for years, and led to a rush of people cashing in points for merchandise for fear of losing them for nothing. Then the company reversed thatdecision, which led to more upset.

Like many loyalty programs, it also devalued the value of its points by requiring more of them to buy anything.

Since then, more and more retail partners have abandoned the program, further eroding its value in the minds of many consumers.

The most recent major blow to Air Miles came last year when Empire Company, which owns the Sobey's and Safeway grocery chains,joined the Scene+ rewards program, founded by Scotiabank and Cineplex.

Patrick Sojka, the founder of loyalty program portal Rewards Canada, says Air Miles has been in troublefor a while now.

"They've lost partners left, right and centre, not just the Sobey'sgroup ...they lost Staples, they lost Old Navy, they lost Rona, Lowe's," he told CBC News in an interview.

While Bank of Montreal is calling the deal a "made-in-Canadaopportunity to enable a reinvigoration for one ofCanada'slargest loyalty programs," there is a chance that another suitor could emergefor Air Miles.

As part of the insolvency proceedings under Chapter 11 of the U.S. Bankruptcy Code and the Company Creditors' Arrangement Act in Canada, LoyaltyOne will undergo a sale process, one that could see a buyer other than BMO emerge with a better offer.

But Sojka says that's unlikely. "There's no big partners outside of Bank of Montreal itself left in that program. And so without a lot of options for additional revenue ... it's less and less surprising that this is happening."