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Nikola to acquire battery pack supplier Romeo Power in $144 million deal


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Nikola Motor Company Two truck
Source: Nikola Motor Company

Electric heavy truck maker Nikola said Monday that it struck a $144 million deal to acquire battery pack supplier Romeo Power, giving the company control over a key part of its supply chain.

The all-stock transaction values Romeo at 74 cents per share, a 34% premium to Romeo’s closing price on Friday. Romeo’s shares were up about 23% to 68 cents in premarket trading after the news was released.

As part of the deal, Nikola will provide Romeo with $35 million in interim funding to continue its operations until the deal closes, the companies said. Nikola said it believes the acquisition could save it up to $350 million over the next four years.

California-based Romeo specializes in building battery modules and packs for large electric commercial vehicles, using lithium-ion battery cells manufactured by other companies. Nikola, which began shipping its electric semi trucks earlier this year and expects to ship between 300 and 500 trucks in 2022, has been Romeo’s largest customer.

Nikola CEO Mark Russell said the deal will let the company accelerate the development of its electrification platform.

“Given our strong relationship with Romeo and ongoing collaboration, we are confident in our ability to successfully integrate and deliver the many expected strategic and financial benefits of this acquisition,” he said.

The deal is a lifeline for Romeo, which like Nikola is one of many companies in the EV space to have gone public via mergers with special-purpose acquisition companies. Romeo went public via a SPAC merger in late 2020, in a deal that valued the combined company at $900 million.

But Romeo had just $66.8 million in cash and equivalents remaining as of the end of the first quarter, after racking up over $250 million in losses. With its shares trading below $1 in recent weeks, and with interest rates rising, Romeo may have been running out of options to stay afloat.

Nikola has been working to win shareholder approval of a measure to increase its total number of shares outstanding, a measure that has been blocked by its former CEO Trevor Milton, who was ousted following allegations that he misrepresented details of Nikola’s technology and order book to investors. Nikola plans to reconvene its shareholder meeting on Tuesday afternoon to announce the current vote totals.

In a regulatory filing on Monday morning, Nikola said it has enough unissued stock to complete the acquisition of Romeo, even if the proposal to increase its shares outstanding fails to pass.

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