Nikola agrees to acquire Romeo Power, to bring battery pack engineering and production in-house

Acquisition puts control over critical battery engineering and manufacturing process

Nikola Corporation and Romeo Power, Inc. announced today that they have entered into a definitive agreement under which Nikola, a global leader in zero-emission transportation and energy infrastructure solutions, will acquire Romeo, an energy technology leader providing advanced electrification solutions for complex commercial vehicle applications, in a full inventory transaction. The proposed exchange ratio implies a consideration of $0.74 per Romeo share and represents a premium of approximately 34% to the closing price of the Romeo share on July 29, 2022 and values ​​100% of Romeo’s equity at approximately $144 million.

Romeo, headquartered in Cypress, California, is an energy storage technology company focused on designing and manufacturing lithium-ion battery modules and packs for commercial vehicle applications. As Romeo’s largest customer, Nikola expects the acquisition to enable significant operational improvement and cost savings in battery pack manufacturing. The addition of Romeo’s battery and battery management system (BMS) technical capabilities are also expected to support accelerated product development and improved performance for Nikola customers.

“Romeo has been a valued supplier to Nikola and we are excited to further leverage their technological capabilities as the vehicle electrification landscape becomes more sophisticated. With control over the essential battery technologies and the manufacturing process, we believe we can accelerate the development of our electrification platform and better serve our customers,” said Mark Russell, Nikola’s Chief Executive Officer. “Given our strong relationship with Romeo and our continued collaboration, we are confident in our ability to successfully integrate and realize the many anticipated strategic and financial benefits of this acquisition. We look forward to creating a zero-emission future together.”

Robert Mancini, Chairman of the Board of Directors of Romeo Power, added: “As Romeo’s largest customer, Nikola has been a cornerstone of our development and growth, and this is a natural evolution of our relationship. Our products provide critical energy density that is important for heavy-duty vehicles, combined with safety performance and battery management software. After an extensive review of alternatives, we firmly believe that this combination provides Romeo’s shareholders with the best opportunity to participate in the continued value creation in a larger, stronger combined company. It’s exciting to see Romeo join the Nikola family.”

Fascinating strategic reason

  • Vertical integration and focus on one product will lead to significant operational improvement and cost reduction for one of the most expensive BOM components
  • Integrated commercial vehicle electric platform is expected to lead to manufacturing excellence and projected annual cost savings of up to $350 million by 2026; reduce the cost of non-cell battery packs by 30-40% by the end of 2023
  • An important strategic move for Nikola with minimal capital expenditure that will bring Romeo’s deep battery and BMS engineering capabilities in-house; is expected to accelerate Nikola’s product development, increase reach and charging rates, and improve customer experiences
  • Provides Nikola with the ability to produce domestic batteries, complementing Nikola’s commitment to the dual-source battery pack strategy to meet capacity needs
  • Romeo has proven battery technologies and a major battery cell supply agreement
  • Nikola is Romeo’s largest manufacturing customer and the parties have a strong, ongoing technical partnership

SOURCE: Nikola

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