With electric vehicle demand predicted to rise dramatically on the heels of the pandemic and clean energy trends, there has been a recent boom in negotiations surrounding producers of lithium-ion batteries and the components used to power them. Tesla Inc. (TSLA, Financial) is reportedly in talks with BHP Group Ltd. (BHP, Financial) for their nickel supplies and Romeo Power, an industry-leading battery manufacturer, has entered into a definitive agreement with RMG Acquisition Corp. (RMG, Financial), a special purpose acquisition company.
SPACs attack
Late last week, reports began to surface that Romeo Power, a company that offers market-leading energy density in its lithium-ion batteries, was entering into talks regarding going public. On Monday, the company announced that RMG Acquisition would be its merger partner to list on the New York Stock Exchange.
The deal is expected to close near the end of this year, with RMG Acquisition providing $384 million through the business combination alongside an additional $150 million in fully committed private investment in public equity through the sale of discount shares.
According to RMG Acquisition CEO Robert Mancini, "Romeo Power stood out as a differentiated leading battery technology company for commercial electric vehicles, a sector that we think is at an inflection point and poised for unprecedented growth."
Romeo Power currently has a joint venture in place with BorgWarner Inc. (BWA, Financial), which provided the company with $50 million in 2019. The company also has $300 million of contracted revenue and an additional $2.4 billion in revenue according to FreightWaves. Rumors suggest there is a deal with startup Nikola Corp. (NKLA, Financial) in the mix, but Romeo Power's president and CEO did claim nearly 70% of the Class 8 commercial vehicle market as customers.
Romeo Power is not the only company to find itself as a desirable acquisition. Hyliion Holdings Co. (HYLN, Financial), an electrified powertrain solutions company, just rang the opening bell after celebrating the completion of its reverse merger combination with Tortoise Acquisition Corp.on Sept. 28. Switchback Energy Acquisition Corp. (SBE, Financial) also tossed its hat in the ring, beginning the SPAC process with charging station developer ChargePoint Inc. on Sept. 24.
Tesla
On the heels of record deliveries in the third quarter, Tesla has entered into talks with BHP to secure nickel resources for its batteries. CEO Elon Musk has stood firm that the company will exceed the 500,000 vehicle delivery goal, yet has expressed ongoing concerns for the potential of a bottleneck with sustainable resources.
The nickel resources that Tesla is seeking out would be used to raise the amount of metal that is used in the batteries. With the nickel resources, the company would be able to improve performance and expand in-house production, which would help Musk in reaching his goal of a $25,000 fully autonomous electric vehicle.
BHP CEO Mike Henry believes that nickel will be in increasingly high demand alongside EVs, which will in turn skyrocket prices. In the last several years, the company has raised sales from less than 5% of output to over 75% of output to the battery supply chain according to the unit's asset president, Eduard Haegel.
Should Tesla be able to secure a nickel deal, it would be able to continue to expand in-house production initiatives and cut down on costs. Musk has indicated that the company has reached out to multiple nickel producers, yet has refrained from naming any potential partners.
Disclaimer: Author owns no stocks mentioned.
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