Nikola Corporation and Romeo Power have entered into a definitive agreement in which Nikola will acquire Romeo in an all-stock transaction. The proposed exchange ratio implies a consideration of $0.74 per Romeo share and represents an approximately 34% premium to Romeo’s 29 July 2022 closing share price and values 100% of Romeo’s equity at approximately $144 million.

Headquartered in Cypress, California, Romeo is an energy storage technology company focused on designing and manufacturing lithium-ion battery modules and packs for commercial vehicle applications. As Romeo’s largest customer, Nikola expects the acquisition will allow for significant operational improvement and cost reduction in battery pack production.

The addition of Romeo’s battery and battery management system (BMS) engineering capabilities are also expected to support accelerated product development and improved performance for Nikola customers.

Rationale for the acquisition includes:

• Vertical integration and single product focus will drive significant operational improvement and cost reduction for one of the most expensive components of the bill of materials.

• Integrated commercial vehicle electrification platform is expected to lead to manufacturing excellence and expected annual cost savings of up to $350 million by 2026; reduce non-cell related battery pack costs by 30-40% by the end of 2023.

• An important strategic move for Nikola with minimal capital outlay that will bring Romeo’s deep battery and BMS engineering capabilities in-house; expected to accelerate Nikola’s product development, increase range and charge rates, and improve customer experiences.

• Provides Nikola with domestic battery pack manufacturing capability, complementing Nikola’s commitment to dual-source battery pack strategy to satisfy capacity needs.

• Romeo has proven battery pack technologies and a significant battery cell supply agreement in place.

• Nikola is Romeo’s largest production customer, and the parties have strong ongoing engineering collaboration.

The transaction has been approved by the Boards of Directors of both companies. Under the terms of the agreement, Nikola will commence an exchange offer to acquire all of the outstanding shares of Romeo common stock. Under the terms of the agreement, Romeo stockholders will receive 0.1186 of a share of Nikola common stock for each Romeo share, representing an equity value of approximately $144 million and 4.5% pro forma ownership of Nikola. The transaction is expected to be completed by the end of October 2022, subject to the tender by Romeo’s stockholders of shares representing a majority of the outstanding Romeo common stock, and customary closing conditions, including regulatory approval.

Upon the successful completion of the exchange offer, a newly-formed subsidiary of Nikola will be merged into Romeo, and any remaining shares of Romeo common stock that were not tendered in the exchange offer will be canceled and converted into the right to receive the same consideration payable in the exchange offer.

Nikola has agreed to provide Romeo with $35 million in interim funding to facilitate continued operations through closing. Funding will consist of $15 million in senior secured notes and up to $20 million for a pack delivery incentive which is a temporary price increase for each pack delivered through expected transaction close. Additional liquidity support is available in the event the transaction closing is delayed.