MONTREAL (Reuters) - DHL Express Division, an affiliate of Deutsche Post (OTC:DPSGY) DHL Group, struck a deal with Cargojet Inc, which would give the German company an option to buy up to 9.5% equity stake in the Canadian firm.
Cargojet said on Tuesday it had reached a five-year extendable deal to provide air-transportation services for DHL Network Operations, as demand for e-commerce soars during the pandemic.
Shares of Ontario-based Cargojet, which provides time sensitive air cargo services, rose almost 14% to C$186.10 in mid-day trading.
International flights using widebody aircraft that offer belly space for shippers are returning more slowly than domestic traffic, creating the need for additional capacity on dedicated cargo planes.
DHL Express Division said the deal for Cargojet to support its international requirements could be renewed for an additional two years.
Under the deal, DHL would be issued warrants to acquire up to 9.5% of Cargojet's outstanding voting shares over a period of seven years, at a price of C$158.92 each, with vesting tied to the delivery of C$2.3 billion in business volume during the term.
"Cargojet is an important aviation partner of DHL in North America and we see this expansion of our relationship further strengthening intra-regional and intercontinental links to and from this region," said Mike Parra, Chief Executive Officer of DHL Express Americas.
"This step builds on the significant investments we have made in DHL's aviation capacity and capabilities over the last two years in the Americas," Parra added.
DHL also intends to be Cargojet's launch customer for new Boeing (NYSE:BA) 7777 wide-body, long-range cargo aircraft which are expected to be deployed in late 2023 or early 2024.