Nikola Motor Company Two trucks
Source: Nikola Motor Company
Electric heavy-duty truck maker Nikola said Monday it has closed a $144 million deal to acquire battery supplier Romeo Power, giving the company control of a key part of the supply chain.
The all-stock transaction values Romeo at 74 cents per share, a 34% premium to Romeo’s closing price on Friday. Shares of Romeo rose about 23% to 68 cents in premarket trading after the news was released.
As part of the deal, Nikola will provide Romeo with $35 million in interim financing to continue operations until the deal closes, the companies said. Nicola said he believed the acquisition could save up to $350 million over the next four years.
California-based Romeo specializes in building battery modules and packs for large electric commercial vehicles using lithium-ion battery cells made by other companies. Nikola, which began shipping its electric semi-trucks earlier this year and expects to deliver between 300 and 500 trucks in 2022, is Romeo’s biggest customer.
Nikola CEO Mark Russell said the deal would allow the company to accelerate the development of its electrification platform.
“Given our strong relationship with Romeo and continued collaboration, we are confident in our ability to successfully integrate and deliver the many anticipated strategic and financial benefits of this acquisition,” he said.
The deal is a lifeline for Romeo, which, like Nikola, is one of many companies in the EV space that have gone public through mergers with special-purpose acquisition companies. Romeo went public through a SPAC merger in late 2020 in a deal that valued the combined company at $900 million.
But at the end of the first quarter, Romeo had just $66.8 million in cash and equivalents after racking up more than $250 million in losses. With its shares trading below $1 in recent weeks and with interest rates rising, Romeo may have exhausted its options to stay afloat.
Nikola has been working to win shareholder approval for a measure to increase the total number of shares outstanding, a move that was blocked by its former CEO Trevor Milton, who was ousted after allegations he misrepresented details about the technology and book orders of Nikola investors. Nicola plans to reconvene the shareholder meeting on Tuesday afternoon to announce the vote total.
In a regulatory filing Monday morning, Nikola said it has enough outstanding shares to complete the Romeo acquisition even if the proposal to increase the outstanding shares fails to pass.
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