Nikola electric trucks launch Corp.
said it has agreed to buy battery technology company Romeo Power Inc.
in an all-stock deal that values Romeo at about $144 million.
Nicola said the deal would give it control over battery engineering and production processes, a critical bottleneck for electric car makers. Romeo, which supplies batteries for Nikola’s vehicles, had earlier warned about its ability to stay afloat.
In the company’s most recent quarterly filing, issued in May, Romeo said it had “material doubt” about its ability to continue as a going concern. Romeo is one of more than two dozen companies that went public through mergers with special-purpose buyout firms to issue so-called going concern warnings.
Nikola said it agreed to provide Romeo with $35 million in interim financing to facilitate continued operations until the deal closes.
The deal, which is expected to close by the end of October, will give Romeo shareholders 0.1186 of a share of Nikola stock for each Romeo share they own. The deal’s exchange ratio implies consideration of 74 cents for each Romeo share and marks a premium of about 34% to where Romeo’s stock closed on July 29.
Romeo shares rose nearly 23% in premarket trading to 67 cents each. The stock has traded nearly 85% lower so far this year.
Nikola is currently Romeo’s largest customer, the companies said, and the deal will lead to operational improvement and cost reduction in Nikola’s battery pack production.
“By taking control of our core 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,” said Nicola CEO Mark Russell.
The deal represents Nikola’s latest attempt to secure battery supply. Earlier this year, the company agreed to a multi-year pact with battery maker Proterra Inc.
As demand for electric cars has increased in recent years, battery production has struggled to keep up. In the last two years, companies from General Motors Co.
to South Korean battery company SK Innovation Co.
have announced investments of more than $30 billion in US battery cell manufacturing and related efforts, according to the Center for Automotive Research.
But right now, Chinese companies dominate the front lines of the EV battery race, an issue that has alarmed lawmakers in Washington. China’s modern Amperex technology Co.
or CATL, and BYD Co.
a Chinese company partly owned by Warren Buffett’s Berkshire Hathaway Inc.,
invest heavily in new technology.
The Biden administration earlier this year invoked the Defense Production Act to boost U.S. production of the materials used in lithium-ion batteries and reduce U.S. dependence on China. And last week, the US Department of Energy said it would lend a GM consortium $2.5 billion to finance the construction of three battery cell factories.
Last month, Tesla Inc.
CEO Elon Musk has described lithium-ion batteries as the “new oil.”
Write to Will Feuer at firstname.lastname@example.org
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