Amazon.com Inc. has signed a deal with Cargojet Inc. that would allow the online retailer to buy a stake in the Canadian cargo carrier.
Under the agreement, Mississauga, Ont.-based Cargojet will issue warrants to Amazon in two tranches to purchase variable voting shares that will vest based on the achievement of certain commercial milestones.
“Cargojet has been a trial player in our Canadian middle mile operations for several years,” said Adam Baker, vice-president global transportation at Amazon, in a statement. “We’re thrilled to build a longer-term relationship that will allow us to provide even faster service to Amazon customers in Canada.”
The first tranch will allow Amazon to buy up to 9.9 per cent of Cargojet’s shares at an exercise price of $91.78 per share, a slight premium to Cargojet’s closing price of $90.67 Thursday in Toronto. This will vest over 6.5 years, tied to the delivery by Amazon of up to $400 million in business volumes to Cargojet over that time.
The second tranch for an additional 5 per cent of Cargojet’s shares has a vesting tied to the delivery by Amazon of up to $200 million in additional business after the first tranche of warrants is fully vested. The exercise price of this tranch will be set two years after the date of the agreement.
Cargojet said the agreement will generate additional revenue growth and be meaningfully accretive to earnings and cash flows over time. Its shares have climbed 28 per cent this year, compared with a 13 per cent gain for the S&P/TSX Composite Index.
CIBC Capital Markets advised Cargojet on the deal.
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