Nikola Corporation (NASDAQ:NKLA) just acquired Romeo Power Inc., a creator of EV batteries. To obtain control over a crucial link in the supply chain, Nikola will acquire Romeo’s battery production facility in Southern California and start making its own EV packs there.
The Acquisition Will Bring More Than $350 Million in Savings for Nikola
By the end of October 2022, it is anticipated that the deal will be finished. According to the agreement, shareholders of Romeo will get 0.1186 Nikola common shares, or $144 million in equity, for every Romeo share they own. The deal will involve only stock.
Romeo will receive $35 million in interim cash from Nikola to keep running its business until the deal is finalized. The fund will be made of up to $20 million for a pack delivery incentive and $15 million in senior secured notes. If the deal closing is postponed, additional liquidity support is available. Nikola estimates that the acquisition will result in savings of up to $350 million over the following four years. By the end of 2023, a reduction in non-cell-related battery pack costs of 30% to 40% is also anticipated. Future Nikola commercial vehicles may be able to give higher range and charge rates thanks to the agreement.
The Deal Will Help Nikola Achieve Zero Emissions Goal
Nikola is a very new electric vehicle manufacturer. The first deliveries of its all-electric Tre truck started in April after it started serial production of the vehicle in Arizona in March. Nikola has been successful in the end-to-end development and delivery of commercial EVs, despite initially reporting a low output. Thus, the agreement will significantly strengthen its commitment to securing a future with no emissions.
In addition, it used to be Romeo’s top battery customer. As a result, the acquisition may further benefit the creation of its commercial EVs because it will bring one of the most expensive parts—battery packs—in-house. This will also allow Nikola to work toward cost reduction while concentrating on its unique EV technology.
Romeo, a California-based company, specializes in producing lithium-ion battery modules and packs for large electric commercial vehicles using cells made by other businesses. Romeo went public through a SPAC merger in the latter half of 2020, much like Nikola and numerous other EV businesses. Romeo’s future growth is consequently anticipated to be significantly influenced by the agreement.
Nikola is convinced that the alliance will add value for the customer, harping on the already-existing relationship with Romeo.
Nikola shares have fallen 30% over the past year.
Featured Image: Megapixl © Timonschneider
