Source: Nikola Motor Company
Electric heavy-duty truck maker, Nikola, said Monday it has struck a $144 million deal to acquire battery pack supplier Romeo Power, giving the company control of a key part of its supply chain.
The all-share deal values Romeo at 74 cents a share, 34% more than Romeo’s closing price on Friday. Romeo’s shares rose about 23% to 68 cents in premarket trading after the news was released.
The two companies said that as part of the deal, Nicola will provide Romeo $35 million in interim financing to continue its operations until the deal closes. Nicola said she believes the acquisition could save her up to $350 million over the next four years.
California-based Romeo specializes in building modules and battery packs for large electric commercial vehicles, using lithium-ion battery cells manufactured by other companies. Nikola, which began shipping half of its electric trucks earlier this year and expects to ship between 300 and 500 trucks in 2022, has been Romeo’s biggest customer.
Mark Russell, CEO of Nikola, said the deal will allow the company to accelerate the development of its electricity platform.
“Given our strong relationship with Romeo and ongoing collaboration, we are confident in our ability to successfully integrate and deliver the many strategic and financial benefits expected from this acquisition,” he said.
The deal is a lifeline for Romeo, which, like Nikola, is one of several companies in the electric vehicle space brought to the public through mergers with special purpose acquisitions. Romeo went public through the SPAC merger in late 2020, in a deal that valued the combined company at $900 million.
But Romeo had only $66.8 million in cash and cash equivalents as of the end of the first quarter, after incurring more than $250 million in losses. With his shares trading at less than a dollar in recent weeks, and with interest rates soaring, Romeo may be running out of options to stay afloat.
Nikola is working to win shareholder approval for a measure to increase the total number of shares outstanding, a measure blocked by former CEO Trevor Melton, who was ousted after allegations he misrepresented Nikola’s technology and investor order book details. . Nicolas plans to resume the shareholder meeting on Tuesday afternoon to announce the current vote total.
In a regulatory filing on Monday morning, Nicola said he had enough unissued shares to complete the acquisition of Romeo, even if a proposal to increase its outstanding shares failed.