Nikola Motor Company Truck Two
Source: Nikola Motor Co.
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 broke.
As part of the agreement, Nikola will provide Romeo with bridge financing of $35 million to continue operations until the transaction closes, the companies said. Nikola said he believes the acquisition could save him up to $350 million over the next four years.
California-based Romeo specializes in building battery modules and packs for large electric utility vehicles, using lithium-ion battery cells made by other companies. Nikola, which began shipping its electric tractor-trailers earlier this year and plans to ship between 300 and 500 trucks in 2022was 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 our continued 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 EV companies to go public through mergers with special-purpose acquisition companies. Romeo went public via a SPAC merger in late 2020, in a deal that valued the combined company at $900 million.
But Romeo was down to just $66.8 million in cash and cash equivalents at the end of the first quarter, 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 run out of options to stay afloat.
Nikola sought shareholder approval for a move to increase its total number of outstanding sharesa measure that has been blocked by its former CEO, Trevor Milton, who was ousted following allegations that he misrepresented details of Nikola’s technology and order book to investors. Nikola plans to reconvene its shareholders’ meeting on Tuesday afternoon to announce the current vote totals.
In a regulatory filing Monday morning, Nikola said he had enough unissued shares to complete the Romeo acquisition, even if the proposal to increase its outstanding shares fails.