Nikola Corporation has entered into a definitive agreement with Romeo Power to acquire the battery supplier for about $144 million in stock.
Nikola said the purchase will allow it to secure control of critical battery pack engineering and production process, as “Romeo has proven battery pack technologies and a significant battery cell supply agreement in place.”
The transaction is expected to yield annual cost savings of up to $350 million by 2026 thanks to the integrated commercial vehicle electrification platform, with Nikola also expecting to reduce non-cell related battery pack costs by 30-40% by the end of 2023.
Romeo Power, one of Nikola’s battery suppliers for its prototype electric trucks along with LG Energy Solution and Proterra Inc, designs and manufactures lithium-ion battery modules and packs for commercial vehicle applications. As Romeo’s largest customer, Nikola expects the acquisition will allow for “significant operational improvement and cost reduction in battery pack production.”
The addition of Romeo’s battery and battery management system (BMS) engineering capabilities are also expected to support accelerated product development and improved performance for Nikola customers. Following the completion of the transaction, Romeo Power’s headquarters in Cypress, California will become Nikola’s Battery Center of Excellence.
“Romeo has been a valued supplier to Nikola, and we are excited to further leverage their technological capabilities as the landscape for vehicle electrification grows more sophisticated. With control over the essential battery pack technologies and manufacturing process, we believe we will be able to accelerate the development of our electrification platform and better serve our customers.”
Mark Russell, Nikola’s Chief Executive Officer
Under the terms of the agreement, Nikola will acquire all of the outstanding shares of Romeo Power common stock. Romeo stockholders will receive 0.1186 of a share of Nikola common stock for each Romeo share, representing an equity value of approximately $144 million and 4.5% pro forma ownership of Nikola.
The transaction is expected to be completed by the end of October 2022. Upon the successful completion of the exchange offer, a newly formed subsidiary of Nikola will be merged into Romeo.
To help Romeo function through closing, Nikola will provide it with $35 million in interim funding, with additional liquidity support to be available in the event the transaction closing is delayed.
