Nikola Is Buying Struggling Battery Maker Romeo Power For $144 Million

As it ramps up electric semi production, the maker of battery- and hydrogen-powered trucks is buying a battery supplier in a deal worth more than $150 million.

Mark Russell, CEO of Nikola, told Forbes that the boards of the two companies agreed to an offer of $0.74 per share. Up to $20 million in battery pack delivery bonus and up to$15 million in senior secured notes will be provided by the company. The deal will close later this year if shareholders approve it.

Russell said that part of the plan was to make sure there was no disruption. The real motivation is to take control of our battery destiny and bring it in-house.

With a worsening climate crisis, battery supplies are a priority for truck and auto manufacturers. Loan and grant programs have been announced by the Biden administration. The Senate is expected to pass new energy legislation that could provide more federal funds to aid production of electric and hydrogen vehicles.

The purchase incentive and the production tax credit for hydrogen are two things that are very important to the industry.

Russell said that after the Romeo acquisition, Nikola will continue to get battery packs from Proterra. The company's Cypress operations will become a battery center of excellence.

“Part of this is defensive, to make sure nothing disruptive happens here”

Romeo has struggled to get more customers for its heavy-duty battery modules that it claims have better energy density and thermal stability than competing packs. The stock price fell from a high of $22.49 a share in December of 2020 to a low of $0.55 on Friday.

The plummet in market cap caused by the fraud allegations against the founder of the company happened in September 2020 and hasn't gone away. His trial on the charges of lying to investors is scheduled to start in September. There was no wrongdoing byMilton. The matter was settled with the SEC for $125 million.

By the end of next year, the company believes it will be able to reduce its battery pack costs by up to 40% and save $350 million over the course of the next ten years.

The company started production of trucks at its Coolidge, Arizona plant in April. Ahead of its second-quarter results announcement, it wants shareholders to approve a stock issuance plan that would help raise funds to build hydrogen fuel stations.

Russell wouldn't say if that measure has investor support, but he did say that the Romeo Power acquisition doesn't rely on it. He said that they made provisions so that they could do the transaction regardless of the proxy vote.

The discussion of the Romeo deal is scheduled to take place today. The time is eastern.