By Transport Intelligence / www.ti-insight.com / August 27th, 2019
Cargojet is an air cargo carrier for Amazon’s middle mile transportation in Canada. This agreement is in conjunction with Amazon’s and Cargojet’s existing commercial agreement for overnight air cargo services and charters. Amazon currently utilises Cargojet’s overnight services to move packages from Amazon facilities to other Amazon or last mile carrier locations before final delivery to customers.
As part of this agreement, Cargojet will issue warrants to Amazon to purchase variable voting shares, that it will award based on commercial achievements related to Amazon’s business with Cargojet. Cargojet expects the agreement to generate additional revenue growth and overtime to contribute to Cargojet’s earnings and cash flows over time.
Cargojet will issue the warrants to Amazon in two tranches. The first tranche of warrants allows Amazon to acquire up to 9.9% of Cargojet’s variable voting shares at an exercise price of $91.78 per share. The first tranche of warrants will vest over a period of six and a half years, with vesting tied to the delivery by Amazon of up to C$400m in business volumes during the same term.
Amazon will also receive additional warrants to acquire up to an additional 5% of Cargojet’s variable voting shares with vesting tied to the delivery by Amazon of up to an additional C$200m in business volumes after the first tranche of warrants is fully vested.
The vesting period for the second tranche of warrants will continue for an additional year, making the aggregate term of all the warrants equal to seven and a half years from the date of the agreement.
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