In the first week of August, electric heavy truck manufacturer Nikola revealed they reached a deal worth $144 million to acquire the battery pack supplier Romeo Power. This would give Nikola direct control over an important quadrant of its supply chain.
This all-stock transaction puts the value of California-based Romeo at 74 cents per share, which is a 34 percent premium on Romeo’s closing stock price on Friday (July 29). Of course, this favorable partnership helpd close Romeo’s shares up 27 percent just a few days later, with Nikola also cosing up, though only 8 percent higher.
Furthermore, the deal dictates that Tesla will offer Romea $35 million in interim funding so they can maintain their operations until the transaction can be finalized and closed. Nikola communicated their faith that the deal will save them as much as $350 million across the next four years.
Taking the other name of the famous scientist, inventor, and engineer who designed the alternating-current (AC) electrical system, Nikola is similar to Tesla in that both companies make and sell electric vehicles. The former, however, focuses on an important auto sector whose electrification benefits are oft overlooked: large trucks.
On the other hand, Romeo specializes in manufacturing battery modules and battery packs used in large electric commercial vehicles, on the basis of lithium-ion battery cells made by other companies. Since they started shipping their electric semi-trucks several months ago—with a projection to ship upwards of 500 total trucks by the end of the year—Nikola has long been Romeo’s biggest customer. Accordingly, then, this acquisition appears to make a lot of sense.
Indeed Nikola CEO Mark Russell explains, “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.”