Romeo Power CEO Lionel Selwood and RMG CEO Robert Mancini
Romeo Power believes there is much more room in the EV market beyond flashy sedans and SUVs. The company designs and makes lithium-ion battery modules and packs for commercial electric trucks and buses. Strategic backers include auto parts supplier BorgWarner Inc. (ticker: BWA), which has a joint venture with Romeo.
Romeo Power plans to merge with a SPAC called RMG Acquisition Corp. (ticker: RMG), with RMG shares converting to shares in Romeo Power by the end of the year under the ticker RMO on the New York Stock Exchange. The deal values Romeo Power at about $1.3 billion.
In an interview with IPO Edge, Romeo Power CEO Lionel Selwood said the partnership with BorgWarner gives it entry into new markets in North America, Europe and around the globe. The full interview is below:
IPO Edge: Why did you choose a SPAC over an IPO?
We believe this highly strategic business decision is the best course of action for our company to take in this current market environment. Going the SPAC route gives us all the benefits that come from an IPO and being traded on the NYSE, without requiring us to go through the restrictive, time consuming, costly and uncertain traditional IPO process.
By merging with RMG Acquisition Corp to become a public company, we immediately elevate the opportunities and resources available to us. This deal will provide us with the resources we need to continue on our path to transform the EV industry by building better battery packs, battery modules and battery management systems. The deal is a massive endorsement of our cutting-edge battery technology, and it furthers our plans to continue to produce and deploy our solutions at scale.
IPO Edge: There have been a number of SPAC deals in the EV space recently. Why should investors invest in Romeo?
We bring to the public markets not just a business plan, but more than $300 million in committed revenues thanks to our promising technology that has been endorsed by leading automakers and investors. Further, we have up to $2.4 billion in revenues under advanced negotiation. In less than five years, we have transformed from a company that had the idea it would like to advance energy technology, to one that has full scale production at its 7 gigawatt hour capable production facility in the greater Los Angeles area and some of the largest global auto brands as customers.
Additionally, we have a very strong, experienced and tech-savvy management team comprised of executives that formerly worked at some of the most innovative companies in the world – including Tesla, Space-X, Amazon and Apple. We are also an incredibly diverse company with 100+ dedicated team members, which includes more than 60 battery-specific engineers. Investors can be confident that we will apply the same innovation and technological leadership that has driven our success so far to our future progress, products and business expansion.
IPO Edge: Can you talk about your modular approach to battery construction and what differentiates your batteries from competitors?
Our safe, longer-lasting batteries with shorter charge times are poised to finally bring large-scale, sustainable transportation into the mainstream. Range and charging speed are the name of the game for today’s EV batteries. Our balanced modular and integrated design is built for superior range and power at an effective cost. Additionally, with EV batteries, the greater the energy density, the longer the range. Our batteries have a 25 percent higher density, thanks to our modular approach to design.
This quick, flexible process gives Romeo an 18-24 month go-to-market advantage over competitors, and the batteries are even recyclable (easy to deconstruct and use in a “second life” battery through our partnership with The Heritage Group).
We take great pride in our intelligent battery management system (BMS) as well. Both our Hermes and Brown Recluse modules use proprietary algorithms and machine learning to optimize fleet safety and efficiency.
IPO Edge: Unlike some of your competitors, Romeo is targeting the commercial EV space specifically. Why is Romeo focused on the commercial market?
Globally, the total addressable market (TAM) for commercial vehicles is estimated to be approximately $665 billion, with over 17 million vehicles sold annually. In North America and Europe alone, the TAM is estimated to be approximately $225 billion, with over 7 million vehicles sold annually. We already have a diversified and high-quality customer base that represents an estimated 70 percent of the North American Class 8 market. Our merger with RMG will only help us to increase our market share within North America, and globally. And while we are focused on the EV space, our technology has applications across a number of industries – including mining, agriculture and aviation. Virtually any industry that is ripe for electrification is a potential growth target for Romeo – and we already have partnerships in a number of these areas.
IPO Edge: You have extensive partnerships with both BorgWarner and The Heritage Group. What do these partnerships bring to Romeo Power?
Our partnership with BorgWarner started back in May 2019 when they made a $50 million strategic investment in Romeo Power and entered into a joint venture with our company. The investment and partnership provides significant third-party validation of our technological leadership and massive market opportunity, while also helping to de-risk commercialization. As a global tier 1 automotive supplier with world-class manufacturing, engineering and technology development expertise, as well as 60 manufacturing facilities globally and deep relationships across the industry and supply chain, BorgWarner gives Romeo entry into new markets in North America, Europe and around the globe.
In regards to The Heritage Group, who was an early investor and a participant in the PIPE through its corporate venture arm, they will support us in the co-development of a battery reuse and recycle facility for our batteries near or at end-of-life. This is critical because less than 5 percent of lithium-ion batteries in the US and Europe are recycled today. They have also committed to a pilot program that is expected to result in converting 500+ diesel trucks in its fleet to BEVs with our batteries between 2021 and 2025.
IPO Edge: How quickly do you plan to utilize the funds? What will they be used for in the immediate future?
Upon the close of the transaction, we will have an enterprise value of nearly $1 billion and no material debt. This is significant in that it allows the company to fully fund its current business plan, which includes the remaining development and large-scale production of our battery modules, battery packs, and battery management systems. Thanks to this transaction with RMG, we will also be able to fulfill four of our key objectives in the immediate future: Expanding our sales team, further leveraging our partnership with BorgWarner, investing in our innovation roadmap to further increase the gap between us and our competitors and continuing to optimize the excellent manufacturing systems that we already have in our production facility today.
Jarrett Banks
Editor-at-Large
IPO Edge
Twitter: @IPOEdge
Instagram: @IPOEdge
