Nikola Agrees to Purchase Romeo Power, Bringing In-House Engineering and Production of Battery Packs

Romeo Power Inc. (NYSE: RMO), a leading energy technology company that provides advanced electrification solutions in complex commercial vehicle applications, and Nikola Corporation (NASDAQ: NKLA), a global innovator in zero-emission transportation systems and energy infrastructure solutions, today announced a definitive agreement under which Nikola will acquire Romeo in an all-stock transaction. The proposed exchange ratio is US$0.74 per Romeo share. It represents an approximately 34% premium over Romeo’s July 29, 2020, closing share price. Romeo’s equity value at US$144 million is 100%.

Romeo, an energy storage company, based in Cypress, California, is focused on designing and manufacturing lithium-ion battery packs and modules for commercial vehicle applications. Nikola is Romeo’s largest client and expects that the acquisition of Romeo will lead to significant operational improvement and cost reductions in battery pack production. Romeo’s engineering capabilities in battery and battery management systems will also benefit Nikola customers.

“Romeo is a valuable supplier to Nikola. We are excited to continue to leverage their technological capabilities in vehicle electrification as the landscape becomes more complex.” Mark Russell, Nikola’s Chief Operating Officer, said that controlling key battery pack technologies and manufacturing processes will speed up our electrification platforms’ development and better serve customers. “With our strong partnership with Romeo and our ongoing collaboration, we feel confident in our ability and capability to successfully integrate this acquisition and deliver the many anticipated strategic and financial benefits. We look forward together to creating a zero-emission future.”

Robert Mancini, Romeo Power Chairman of the Board of Directors, added: “As Romeo’s largest client, Nikola has been an integral part of our growth and development, and this is a natural progression of our relationship. Our products combine safety performance with battery management software and critical energy density for heavy-duty vehicles. We have reviewed all alternatives and believe that this combination will offer the best chance for Romeo shareholders to continue value creation on a larger scale with a stronger combined company. It is thrilling to see Romeo join our Nikola family.”

A Compelling Strategic Rationale
Vertical integration and a single product focus will lead to significant operational improvements and cost reductions in one of the most expensive parts of the bill.

A commercial vehicle electric platform integrated with commercial vehicles is expected to improve manufacturing and lead to annual cost savings of up US$350 million per year by 2026. Non-cell-related battery packs will be reduced by 30-40% by the end of 2023.
A strategic move that Nikola will make with minimal capital. Romeo’s deep battery engineering and BMS engineering capabilities will be brought in-house. This will enable Nikola to increase product development, charge rates, and customer experience, as well as accelerate Nikola’s product development.

Nikola will have a domestic manufacturing facility, adding to its commitment to a dual-source battery pack strategy to satisfy capacity requirements.
Romeo has a proven battery pack technology and a substantial supply agreement.
Romeo’s largest producer customer is Nikola. The parties also have strong ongoing engineering cooperation.
Exchange Offer

The Board of Directors of both companies has approved the transaction. Nikola will launch an exchange offer for all of Romeo’s common stock shares by the contract provisions. According to the agreement, Romeo stockholders receive 0.1186 shares for each of Nikola’s common stocks for every Romeo share. This will give them an equity value of approximately US$144 million and 4.5% pro forma ownership. The transaction is expected close by the end of October 2022. This is subject to Romeo’s stockholders tendering shares representing a majority share of Romeo’s common stocks outstanding and other customary closing conditions. After the exchange offers are successful, the newly formed subsidiary of Nikola will be merged into Romeo. All shares of Romeo stock not offered in the exchange offer will be canceled and converted to the right of the same consideration.
Interim Liquidity Support

Nikola has committed to providing Romeo with US$35,000,000 in interim funding for continued operations and closing. The funds will consist of US$15Mn in senior secured notes and US$20Mn for a pack shipping incentive. There will be a temporary price increase for each package delivered during the anticipated transaction closing. If the deal completion is postponed, further liquidity support is provided.