Amazon acquires nearly 20% of the Cargo Carrier Air Transport Services group
By stepping up its increasingly important logistics efforts, Amazon (AMZN -1.12% ) exercised options to acquire a share pack in the air freight operator Air Transport Services Group (ATSG 0.22% ).
The distribution giant pulled the trigger on more than 14.4 million common shares of Air Transport Services by exercising multiple warrants. For nearly 13.6 million of these shares, he pays close to 132 million dollars. The remainder is acquired cashless under the terms of the warrants.
These purchases will give Amazon nearly 20% of air transport services. And that might just be the start. According to the latter, Amazon still holds enough warrants to give it a stake of less than 40%.
The partnership between the two companies dates back to 2016, when Air Transport Services began operating planes for Amazon’s air cargo unit.
With logistics being a fundamental aspect of its business, Amazon continues to focus on it. At the beginning of this year, the company bought its first aircraft – 11 Boeing 767-300 jets. Previously, the company only leased planes. Building a robust logistics effort, both in the air and on the ground, reduces Amazon’s dependence on third-party partners.
So far, Amazon has not commented on the exercise of its airline service warrants. Purchases are subject to US Department of Transportation approval. With a stake of less than 20%, the business is unlikely to be blocked.
Despite what should be seen as a positive development for Amazon, the company’s shares fell 1.6% on Monday, a steeper drop than the S&P 500 0.5% drop in the index. Unsurprisingly, Air Transport Services performed well with an increase of 5.5%.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.