Nikola to acquire Romeo in all stock deal

Nikola Corporation will acquire Romeo Power in an equity transaction.

The proposed exchange ratio implies a value of US$0.74 per Romeo share, a 34% premium to the share’s closing price on July 29, 2022, and values ​​equity at $144 million.

“[Our] acquisition of Romeo Power is an important strategic step with minimal capital expenditure that will lead to: [their] deep battery and in-house BMS engineering,” Nikola said in a statement.

“It is expected to accelerate” [our] increase product development, reach and charging rates and improve customer experiences.”

Romeo, based in Cypress, California, is an energy storage technology company specializing in the design and manufacture of lithium-ion battery modules and packages for commercial vehicles.

As Romeo’s largest customer, Nikola expects the acquisition to enable significant operational improvement and cost savings in battery pack manufacturing. The addition of battery and battery management system engineering (BMS) is also expected to support accelerated product development and improved performance.

“Romeo is a valued supplier to Nikola…. With control over the critical battery technology and manufacturing process, we believe we can accelerate the development of our electrification platform and better serve our customers,” said Mark Russell, CEO of Nikola.

Robert Mancini, President of Romeo Power, added: “After an extensive assessment of alternatives, we firmly believe that this combination offers the best opportunity for [our] shareholders to participate in the continued value creation on a larger scale, stronger combined business.”

An integrated commercial vehicle electrification platform is expected to deliver annual cost savings of up to $350 million by 2026 and reduce the cost of non-cell battery packs by 30-40% by the end of 2023.

The acquisition gives Nikola the ability to produce household battery packs, complementing its commitment to dual-source battery packs to meet capacity needs.

Both companies already have a strong ongoing engineering partnership.

Under the terms of the agreement, Nikola will make an exchange offer to acquire all outstanding shares of Romeo common stock. Shareholders of Romeo will receive 0.1186 of a share of Nikola common stock for each Romeo share.

Upon successful completion of the exchange offer, a newly formed Nikola subsidiary will be merged with Romeo.

Nikola agreed to provide Romeo with $35 million in interim funding to facilitate continued operations through closure.

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