Shares in Cargojet Inc. shot higher after the company announced a new deal with Amazon.com that could see the online retailer acquire a stake in the company which provides overnight air cargo services.
The company’s shares were up $14.88 at $105.55 in morning trading on the Toronto Stock Exchange.
Amazon uses Cargojet’s overnight air network and charter aircraft services to move packages between facilities and to other carrier locations.
Under the agreement, Cargojet will issue warrants to Amazon for variable voting shares that will vest based on commercial milestones related to Amazon’s business with Cargojet.
The first tranche will allow Amazon to buy up to 9.9 per cent of Cargojet’s variable voting shares at an exercise price of $91.78 per share. They will vest over a period of six and a half years, with vesting tied to the delivery by Amazon of up to $400 million in business.
Amazon will also receive additional warrants for up to an additional five per cent of Cargojet’s shares with vesting tied to an additional $200 million in business after the first tranche of warrants is fully vested. The vesting period for the second tranche will run for an additional year.
“The commercial relationship the Cargojet team continues to build with Amazon has now allowed us to further strengthen and align our long-term strategic commercial interests,” Cargojet chief executive Ajay Virmani said in a statement.
“Our continuous commitment to provide value added services enables us to earn all of our customers’ trust as the leading overnight air-network operator.”