Nikola Motor Company Two trucks
Source: Nikola Motor Company
Electric heavy truck maker Nikola said on Monday it has reached a $144 million deal to acquire battery supplier Romeo Power, giving the company control of a key part of its supply chain.
The all-stock deal values Romeo at 74 cents a share, up 34% from Romeo’s Friday closing price. Romeo shares rose about 23% to 68 cents in premarket trading after the news.
As part of the deal, Nikola will provide $35 million in temporary funding for Romeo to continue operations until the deal closes, the companies said. Nicola said he believes the acquisition could save up to $350 million over the next four years.
California-based Romeo specializes in the production of battery modules and packs for large electric commercial vehicles using lithium-ion battery cells made by other companies. Nikola, which started deliveries of its electric semi-trailers earlier this year and expects to ship between 300 and 500 trucks in 2022, was Romeo’s biggest customer.
Nikola CEO Mark Russell said the deal will allow the company to accelerate the development of its electrification platform.
“Given our strong relationship with Romeo and ongoing collaboration, we are confident in our ability to successfully integrate and realize the many anticipated strategic and financial benefits of this acquisition,” he said.
The deal is a lifeline for Romeo, which, like Nicola, is one of many electric vehicle companies that went public through a merger with special purpose acquisition companies. Romeo went public with the 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 cash equivalents after the company suffered losses of more than $250 million. With its shares trading below $1 in recent weeks and interest rates rising, Romeo may have run 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 that was blocked by its former CEO, Trevor Milton, who was fired after accusations that he misrepresented Nikola’s technology details and order book to investors . Nikola plans to reconvene the shareholders’ meeting on Tuesday afternoon to announce the current voting results.
In a regulatory filing Monday morning, Nikola said it has enough unissued shares to complete the acquisition of Romeo, even if the offer to increase the number of outstanding shares is not accepted.