Romeo Power, a maker of battery packs and modules for electric vehicles, got a new home in Cypress earlier this year. Now it has a new owner and new management structure.
Nikola Corp. (Nasdaq: NKLA), a Phoenix-based maker battery-electric and hydrogen-electric powered trucks, on Oct. 14 completed the acquisition of Romeo Power (NYSE: RMO), its main supplier of lithium-ion battery packs, after a successful tender offer.
In August, Nikola had inked a deal to acquire Romeo Power for $144 million in stock.
Romeo’s new base along Katella Avenue is now labeled Nikola’s “battery center of excellence.”
“We will be publicly announcing more details in the near future and are currently planning the integration process,” a spokesperson for Nikola told the Business Journal.
Romeo Power ranks No. 5 on this week’s list of Fastest-Growing Public Companies in the small category based in Orange County, with two-year growth of nearly 98%.
Exec Departures
“We have had about 10 manufacturing engineers working on-site at Romeo since early 2022 to support Romeo’s production,” Nikola Chief Executive Mark Russell told analysts in August.
“With a good, accumulated understanding of Romeo’s operations, we have identified several areas of operational improvements that will begin to be implemented immediately following the transaction closing.”
Regulatory filings indicate that most of Romeo Power’s exec team departed at the time the deal was completed this month.
Chief Executive and President Susan Brennan, Chief Strategy and Commercial Officer Lauren Webb, and CFO Kerry Shiba, among others, “resigned as officers of the company” at the time the sale was completed, filings indicate.
Falling Valuation
Romeo Power’s products are designed to charge commercial vehicles such as trucks, buses and delivery vans.
The company went public at the end of 2020 via a reverse merger with a Special Purpose Acquisition Company, or SPAC, and initially counted a valuation in the $900 million range.
Its value fell sharply over the course of the past year, prior to the deal with Nikola, and the company was facing a cash crunch. The sales transaction with Nikola provided interim financing to Romeo to keep its operations running the past several months.
The takeover is the latest major shift in Orange County’s growing electric vehicle development hub, which ranges from upstart EV maker Rivian Automotive Inc. (Nasdaq: RIVN) to battery developer Enevate and electric-charging site specialist Qmerit, all of them based in Irvine.
Stock Slip
Nikola’s shares, like many EV makers of late, have fallen over the course of 2022. Its stock has dropped roughly 50% since the Romeo deal was announced; it was valued around $1.3 billion as of last week.
“We are pleased to complete the acquisition of Romeo and look forward to executing on the opportunities ahead,” Michael Lohscheller, Nikola’s president, said in a statement on Oct. 14.
“The acquisition of Romeo will enhance Nikola’s capabilities, allowing us to vertically integrate in an effort to accelerate product development and improve performance for our customers,” according to Lohscheller.
The truck maker, which itself went public via a SPAC deal in mid-2020 and at one point carried a valuation over $12 billion, has said that bringing Romeo’s operations in-house could save it up to $350 million by 2026.
LA to OC
Nikola has been Romeo’s main customer and was committed to purchasing about $243 million of the company’s battery modules and packs, according to Romeo’s latest annual report.
Despite that existing contract, and the SPAC transaction at the end of 2020 that provided Romeo with nearly $400 million in funding, the Cypress firm’s short-term viability had previously been in doubt.
The initial sale announcement in August came just a week after Romeo Power said it completed its move from the southern Los Angeles town of Vernon to its new 215,000-square-foot manufacturing center and headquarters in Cypress.
The building was designed for testing, engineering, design, quality, production, shipping and support services.
Romeo Power said last year it would be bringing more than 250 workers to the space at 5560 Katella Ave.
Nikola had about 900 employees as of Dec. 31.
The new site in Cypress contains 24,000 square feet of office space dedicated to engineering, product management, quality and other support resources, and another 191,000 square feet of factory space dedicated to automated module manufacturing, pack assembly and advanced testing laboratories.
Founder Issues
Nikola announced the completion of the Romeo Power purchase on Oct. 14, the same day Nikola’s founder, Trevor Milton, was convicted of fraud for misleading investors.
He was found guilty of one count of securities fraud and two counts of wire fraud by a federal jury in Manhattan.
Nikola itself wasn’t facing charges in the case, CNBC reported.
“Although Milton still owns Nikola stock, the company had otherwise cut ties with him,” according to CNBC.
