Nikola is powering up with Romeo Power

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Romeo Power has agreed to be bought by Nikola in a transaction valued at $144 nikola expects this move to increase its vertical integration and result in significant savings over the next few years.

Image Source- InvestorPlace

Electric truck maker Nikola announced that it had purchased battery pack supplier Romeo Power for $144 million on Monday, solidifying the company’s supply chain.

In a stock-only transaction, Romeo’s share value is 74 cents per share, or a 34% premium to Friday’s closing price. Romeo’s shares then went up 27% in value on Monday. Nikola’s shares fell nearly 8%.

As part of the agreement, Nikola will provide Romeo with $35 million in interim funding to continue operations until the transaction closes, while Nikola’s executives estimate that they could save up to $350 million over the next four years.

California-based Romeo manufactures lithium-ion battery modules and packs for electric vehicles using cells manufactured by other companies. Nikola, which began shipping its electric semi-trucks earlier this year and plans to ship between 300 and 500 trucks by 2022, is Romeo’s largest customer.

Nikola CEO Mark Russell said the deal will let the company develop its electrification platform more quickly.

our successful relationship with Romeo and ongoing collaboration give us confidence in our ability to integrate and deliver the many expected strategic and financial benefits of this acquisition,” he said.

It is a lifeline for Romeo, which like Nikola is one of many electric vehicle companies that went public via mergers with special purpose acquisition companies. Late in 2020, Romeo went public via a SPAC merger, valuing the combined company at $900 million.

Image Source- Financial Buzz

But Romeo Inc. had $66.8 million left in cash and equivalents as of the end of the first quarter, after more than $250 million in losses. Romeo may have run out of options to stay afloat with its shares trading below $1 in recent weeks and interest rates rising.

Nikola has been attempting to win approval from shareholders to issue more shares of stock. But former CEO Trevor Milton (ousted following accusations that he lied to investors about Nikola’s technology and order book) has blocked that measure. Nikola plans to convene its shareholders’ meeting on Tuesday afternoon to announce the current vote totals.

Nikola said it has enough unissued stock to complete the acquisition of Romeo even if the proposal to increase its shares outstanding fails.

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