Commercial Vehicles

Nikola acquires Romeo Power, takes batteries in-house


Electric truck maker Nikola has agreed to acquire Romeo Power, thus taking battery development and manufacturing in-house. The agreement is definitive. Romeo specialises in batteries for commercial EVs, and their Cypress factory will become Nikola’s Battery Center of Excellence.

++ This article has been updated; please continue reading below. ++

Nikola expects the Romeo acquisition to yield annual cost savings of up to $350 million by 2026. As Romeo’s largest customer, Nikola expects operational improvement and cost reduction in battery pack production of up to 40%. This is due to vertical integration and single product focus. Adding Romeo’s engineering capabilities will accelerate product development for Nikola customers, says the company.

“Romeo has been a valued supplier to Nikola,” said Mark Russell, Nikola’s Chief Executive Officer. “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.”

In 2023, Nikola expects to reduce non-cell-related battery pack costs by 30-40%.

The acquisition is an all-stock transaction with Nikola offering Rome shareholders an exchange ratio of $0.74 per Romeo share. Nikola says this represents an app. 34% premium to Romeo’s current closing share price and values Romeo at about $144 million.

Robert Mancini, Romeo Power’s Chairman of the Board of Directors, said, “Following an extensive review of alternatives, we firmly believe that this combination offers the best opportunity for Romeo shareholders to participate in the ongoing value creation at a larger scale, stronger combined company.”

A newly formed Nikola subsidiary will merge with Romeo upon completing the exchange offer. Any remaining Romeo common shares not tendered in the exchange will be voided and converted into the right to receive the same consideration as in the exchange offer. Nikola has agreed to provide interim financing of $35 million to Romeo to enable it to continue operations until the transaction’s closing.

What impact the Romeo acquisition by Nikola will have on the battery specialist’s other customers is currently unclear. For example, Romeo and converter Wrightspeed have worked together since March to develop and offer conversion kits to electrify existing buses and trucks. The company also has a long-term supply agreement with PACCAR to deliver batteries for coming electric trucks until at least 2025.

Romeo Power was listed publicly last year via a merger with investment firm RMG Acquisition. Former engineers from SpaceX, Tesla, Apple, Amazon and Samsung founded the battery start-up in 2016.

Nikola started mass production of its Tre battery-electric truck at its Coolidge plant in Arizona in late March 2022. The first customer trials are underway.

The Nikola acquisition of Romeo is expected to be completed by the end of October.

Update 17 October 2022

Nikola Motor has completed the acquisition of Romeo Power as scheduled. Michael Lohscheller, Nikola’s President, said this would “enhance Nikola’s capabilities, allowing us to vertically integrate in an effort to accelerate product development and improve performance for our customers”.

No statement has been made on the final purchase price of the future of existing Romeo customers.

As a result of the acquisition, Romeo shares ceased trading on 14 October and will no longer be listed on the New York Stock Exchange., (update Oct’ 22)


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