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Amazon receives options to buy stake in Cargojet

Cargojet Inc. on Aug. 23 entered into an agreement with an Amazon.com Inc.'s subsidiary after which the e-commerce giant will receive warrants to buy a stake in the Canadian cargo carrier.

The cargo service company already provides overnight air network and charter aircraft services for Amazon to ship packages from the retailer's facilities to other Amazon or carrier locations.

The call warrants will be issued in two tranches, subject to certain commercial milestones related to Amazon's business with Cargojet.

In the first tranche of warrants, Amazon can take up to 9.9% of Cargojet's variable voting shares at an exercise price of $91.78 per share. The first tranche vests for a period of 6.5 years, tied to Amazon providing up to C$400 million in business volumes to Cargojet in that time period.

The Seattle-based company can buy up to an additional 5% of Cargojet's variable voting shares, conditional upon the delivery by Amazon of up to C$200 million in business volumes after the first tranche of warrants is fully vested. The vesting period for the second tranche is for an additional year.

Cargojet expects the agreement to generate additional revenue growth. The company's shares rose 12.86% on Aug. 23 to close at C$102.33.