September 16, 2013

TD Bank Group, Aimia and CIBC confirm agreements

TORONTO -- TD Bank Group (TD), Aimia Inc. (Aimia) and Canadian Imperial Bank of Commerce (CIBC) today confirmed that they have signed agreements under which TD will become the primary issuer of Aeroplan Visa credit cards on January 1, 2014, and will acquire approximately 50% of the existing Aeroplan credit card portfolio from CIBC.

"This is an excellent opportunity for TD to build on our position as a leading North American credit card provider - it solidifies our position as the number one credit card issuer in  Canada, by outstanding credit card balances. Acquiring about half of the existing Aeroplan Visa credit card accounts will enable us to grow our business while offering great choice and value to our customers," said Ed Clark, Group President and CEO, TD Bank Group. "We look forward to welcoming new cardholders to TD as we introduce a full suite of co-branded Aeroplan Visa credit cards to complement our already strong line-up of cards."

For current Aeroplan Visa cardholders, nothing changes this year and no action is required. Cardholders can continue to use their existing Aeroplan-branded credit cards, earning Aeroplan miles on every purchase. Accumulated miles are not affected by any change to the credit card issuer. TD and CIBC will communicate directly to cardholders about next steps very soon, to make the transition a smooth and comfortable experience.

In 2014, Aeroplan-branded credit cardholders will be able to benefit from the new suite of credit cards, which will offer enhanced accumulation and other improvements, along with Aeroplan's new Distinction recognition program.

Highlights of the agreements
Subject to certain closing conditions, TD expects to acquire approximately 50% of CIBC's Aeroplan credit card portfolio, which will primarily include accounts held by customers who do not have an existing retail banking relationship with CIBC. As Aeroplan's primary credit card issuer beginning January 1, 2014, TD will offer new co-branded Aeroplan Visa credit cards and will hold the exclusive rights to mass market Aeroplan Visa credit cards.

TD expects that the agreements with CIBC and Aimia will result in a contribution of approximately 10 cents per share to 2014 earnings on an adjusted basis, and to be dilutive by approximately 7 cents per share on a reported basis. The portfolio is expected to contribute approximately 15 cents per share on both a reported and adjusted basis in 2015. At closing, TD's Basel III Common Equity Tier 1 ratio is expected to decrease by approximately 19 basis points on a pro forma basis as at TD's last quarter ending July 31, 2013 as a result of the transaction. The CIBC portfolio acquisition transaction is expected to close in December 2013 and is subject to customary closing conditions, including regulatory approvals.

In connection with the acquisition of the CIBC Aeroplan accounts, TD will pay $162.5 million to CIBC.  This includes a payment of $50 million on closing, reflecting a price of par plus $50 million for the CIBC Aeroplan accounts, as well as a commercial subsidy agreement that will see TD pay CIBC a further $112.5 million plus HST over three years. TD expects to acquire approximately 550,000 cardholder accounts, representing approximately $3 billion in card balances and $20 billion in annual retail spend.  Depending on the migration of Aeroplan-branded credit card accounts between CIBC and TD over the next five years, TD, Aimia, and CIBC have agreed to make additional potential payments of up to $400 million. TD will be responsible for - or entitled to receive - up to $300 million of these potential payments.

Additionally, TD and Aimia have updated their 10-year program agreement. As previously announced, TD will make a$100 million upfront payment to Aimia to assist in the development and maintenance of the new Distinction program. The minimum miles purchase commitment has been updated to a five-year volume commitment based on miles purchases by TD and CIBC. These payments by TD, in aggregate, would not exceed $95 million. Also, as announced, TD and Aimia will undertake a joint marketing spend of approximately $140 million in the first four years of the program to support the new Aeroplan Visa co-branded credit cards and program features.




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