Blank Check Companies Target Battery and Charging Suppliers

Romeo Systems Inc., which manufactures lithium-ion battery packs and modules for commercial electric vehicles, is the latest vehicle electrification technology company to acquire public ownership through a reverse merger.

Romeo, based in the Los Angeles suburb of Vernon, Calif., Announced a definitive agreement monday with RMG Acquisition Corp. (NYSE: RMG), an ad hoc acquisition company (SPAC), to group companies together. Romeo Power’s pro forma valuation would be $ 1.33 billion.

Energy-related PSPCs are emerging

Also on Monday, the leaders of Hyliion Holdings Co. (NYSE: HYLN) rang the opening bell on the New York Stock Exchange (NYSE). He celebrated on September 28 the completion of its reverse merger with Tortoise Acquisition Corp., a SPAC that raised $ 560 million for the leading manufacturer of electric transmissions.

In terms of infrastructure, Switchback Energy Acquisition Corp. (NYSE: SBE) started the PSPC process with charging station developer ChargePoint Inc. September 24. This deal would value ChargePoint at $ 2.4 billion. ChargePoint, which has 115,000 charging stations, would get $ 542 million when the reverse merger closes.

Like Tortoise Acquisition and Switchback Energy, RMG is a so-called blank check company. Formed in 2019 specifically to target an energy technology company for a merger, RMG raised $ 384 million through an initial public offering in PSPC. He also raised $ 150 million through the sale of shares at a discount to investors as part of a public equity private investment offering (PIPE).

Selected from 150 candidates

Romeo will get this money when the deal is closed. This is expected by the end of the fourth quarter, when the NYSE ticker symbol changes to RMO.

“Since our IPO in early 2019, we have evaluated nearly 150 investment opportunities seeking a company with cutting edge disruptive technology in the industrial or energy sector,” said Robert Mancini, CEO of RMG, in a press release.

“Romeo Power has distinguished itself as a leading and differentiated company in the field of battery technology for commercial electric vehicles, a sector which we believe is at an inflection point and on the verge of a unprecedented growth. “

The global total addressable market (TAM) for commercial vehicles is estimated at $ 665 billion, with more than 17 million vehicles sold each year. In North America and Europe, the APR is estimated at $ 225 billion, with more than 7 million vehicles sold each year, according to the press release from Romeo and RMG.

Generate income

Romeo has $ 300 million in contract income with $ 2.4 billion in uncommitted income. It also has a joint venture with the Tier 1 supplier BorgWarner Inc. (NYSE: BWA), who invested $ 50 million in 2019 for a 20% stake in the company. The alliance enables Romeo to grow faster through access to BorgWarner’s customer base, supply chain and manufacturing expertise.

“We have an order backlog with customers that represent nearly 70% of the Class 8 utility vehicle market in North America, including both traditional businesses and new generation emerging businesses,” Lionel Selwood Jr. , Romeo chairman and CEO, said on a conference call Monday.

Romeo claims the energy density of its batteries leads the industry. This allows for a greater range between charges and shorter charge times. Its target customers in North America are manufacturers of Class 4-8 trucks.

An agreement with Nikola?

One of these deals would be to provide starting batteries Nikola Corp. (NASDAQ: NKLA), another company that went public through a reverse merger. The Wall Street Journal reported On September 21, Nikola was testing Romeo batteries for use in the Nikola Tre.

The rugged cabover model is expected to go into production next year in Germany in a joint venture with Iveco, a subsidiary of CNH Industrial SA (NYSE: CNHI). CNHI is an investor in Nikola.

A spokeswoman for Nikola told FreightWaves on Tuesday that the company “had not made any public announcements with Romeo.”

Recently deceased founder and executive chairman Trevor Milton said Nikola makes his own batteries. CFO Kim Brady told analysts during a virtual meeting in September, Nikola designs his own batteries. He didn’t talk about manufacturing.

Other partnerships

Romeo Power is teaming up with HG Ventures, an early investor and participant in PIPE, to co-develop a battery reuse and recycling facility for Romeo Power batteries.

HG Ventures parent company Heritage Group has embarked on a pilot program to convert more than 500 diesel trucks in its fleet to battery-electric vehicles using Romeo Power batteries between 2021 and 2025.

Republic Services (NYSE: RSG), is the second largest recycling and waste disposal company in the United States. It has a fleet of more than 16,000 vehicles. Republic has invested in PIPE and intends to enter into a strategic alliance, Selwood said.

Republic, which took delivery of a Mack Trucks LR Electric garbage truck on Tuesday, has ordered 2,500 Tre-based garbage trucks from Nikola. The company did not respond to a question on Tuesday about using its investment in Romeo Power for its batteries to be used by the companies from which it orders electric trucks.

Related Articles:

PSPC shareholders approve merger to make Hyliion public

Nikola explains what he does and doesn’t do on electric trucks

Republic Services orders 2,500 electric garbage trucks from Nikola

Click for more FreightWaves articles by Alan Adler.

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