Nikola Is Buying Struggling Battery Maker Romeo Power For $144 Million

Nikola is purchasing Romeo Power to guarantee stable supplies of battery packs for its Tre BEV electric semi.

Nikola, a creator of battery-and hydrogen-fueled trucks, is getting battery provider Romeo Power in an all-stock arrangement worth $144 million that it says will guarantee stable admittance to lithium-particle packs as it slopes up electric semi creation.

Sheets of Phoenix-based Nikola and Romeo consented to a proposal of $0.74 per share, a 34% premium to Romeo’s July 29 shutting value, Nikola CEO Mark Russell tells Forbes. Nikola will likewise give Romeo $35 million of subsidizing to balance out its tasks until the arrangement closes — $15 million in senior got notes and a battery get conveyance reward worth $20 million. The collection needs endorsement from investors and is supposed to close in the future.

Nikola is Romeo’s primary client, so “a piece of this is guarded, to not ensure anything problematic occurs here,” Russell said. “In any case, the genuine inspiration is key: we’re assuming command over our battery predetermination and acquiring this house.”

Battery supplies are essential for truck-and automakers turning from naturally unpleasant energizes to electric drive amid a demolishing environment emergency. The Biden Administration has previously declared advance and award programs expected to spike homegrown battery creation. In the meantime, new energy regulation clearing its path through the Senate could give more government assets essentially to help design electric and hydrogen vehicles and impetuses for shoppers and business armada administrators to get them.

Romeo Power delivers uncompromising battery packs for business vehicles at its Cypress, California, base camp.

“Assuming what winds up going into regulation incorporates that buy impetus and the creation tax break for the hydrogen, those are two things that are exceptionally vital to us and the business,” Russell said.

Nikola likewise gets battery packs from Silicon Valley-based electric truck and transport producer Proterra and will keep on doing as such after the Romeo securing, Russell said. It’s adding 400 Romeo representatives, and the organization’s Cypress tasks will turn into Nikola’s Battery Center of Excellence.

“Some portion of this is protective, to not ensure anything troublesome occurs here.”

Nikola CEO Mark Russell

Established in 2015 utilizing battery innovation created by previous SpaceX and Tesla engineers, Romeo has battled to arrange extra clients for its uncompromising battery modules that it claims have better energy thickness and warm dependability than contending packs. After opening up to the world through a SPAC bargain in late 2020, Romeo’s stock cost has plunged from a high of $22.49 an offer on December 1, 2020, to 55 pennies at the end of exchange on Friday.

Nikola hasn’t fared much better, encountering a sharp drop in market cap set off by misrepresentation claims against organizer Trevor Milton in September 2020. Government investigators have accused him of misleading financial backers about Nikola’s innovation, and his preliminary over the matter is presently booked to begin on September 12. Milton has denied any bad behavior. Nikola settled with the Securities & Exchange Commission over the issue last year, consenting to a $125 million fine.

The organization appraises that incorporating Romeo into its activities could diminish its battery pack costs by up to 40% toward the finish of the following year and save it as much as $350 million by 2026.

“The arrangement better positions Nikola to change as battery innovation changes,” Jeffrey Osbourne, a Cowen value expert, said in an exploration note. “We see the arrangement as a sharp and legitimate key fit as Nikola is Romeo’s biggest client.”

Under Russell, the organization is pushing ahead with creation of trucks at its Coolidge, Arizona plant, which began in April. What’s more, in front of the declaration of its second-quarter result on August 4, it’s pushing investors to support a stock issuance plan to raise extra assets to help create and develop hydrogen fuel stations.

Russell would disagree, assuming that action has the financial backer sponsorship it needs however notice that the Romeo Power obtaining doesn’t depend on it. “We have been dealing with this for some time, and we’ve made arrangements so we can do the exchange and have the stock accessible to us, paying little mind to what occurs with the intermediary vote,” he said.

Nikola shares rose 7.9% on Nasdaq exchanging to $6.71, while Romeo bounced 27% to 69.8 pennies at 12:16 p.m. New York time.

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Adam Collins
Adam writes about technology, business and economics. With master's degree in Economics, he's presented six papers in international conferences. As a solivagant in the constant state of fernweh, curiosity is the main weapon in his arsenal.

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