Amazon to take equity stake in Canadian airline Cargojet
NASDAQ-LISTED Amazon.com has announced it will acquire a minority equity stake in Canadian cargo airline Cargojet Inc, Amazon's air carrier partner in Canada.
Under the deal, Cargojet will issue warrants allowing Amazon to acquire up to 9.9 per cent of Cargojet's voting shares at an exercise price of US$91.78 a share. The warrants will vest over six and a half years and be conditional to Amazon providing Cargojet with CAD400 million (US$300.6 million) in volumes over the same period.
In a separate transaction but with similar terms, Amazon will receive warrants to buy up to an additional 5 per cent of Cargojet's variable voting shares for CAD200 million. The vesting period for the second cluster of warrants will be seven years.
Amazon has similar financial relationships in the US with air carrier partners Atlas Air Worldwide Holdings Inc and Air Transport Services Group Inc.
Cargojet provides overnight air deliveries that support Amazon's 'middle-mile' Canadian network, which links the e-tailer's facilities with other locations prior to the execution of the final delivery to customers. The financial agreement is designed to strengthen Amazon's commitment to using Cargojet's services, Cargojet said. The airline also provides customers with what are known as 'ACMI' services in which the carrier provides the aircraft, crew, maintenance and insurance.
Cargojet, based in Toronto, operates 21 freighters, comprised of Boeing Co 757s and 767s. The carrier plans to add nonstop flights in its 15-city Canadian network, as well as bring new markets online with the overarching goal of providing later cut offs for pickups and earlier delivery times to its customers, reports New York's FreightWaves.