Exro Tech To Acquire SEA Electric For $402 Million

Exro Technologies (TSX: EXRO) is set to acquire SEA Electric, a company focused on electrifying vehicles, in a transaction that will heavily dilute current shareholders.

While the resulting company will continue with the name of Exro Technologies, current shareholders will own just 34.5% in the resulting company. The transaction sees SEA Electric valued at C$402 million, with Exro paying for the purchase via the issuance of common shares and non-voting convertible preferred shares.

SEA shareholders are to receive 153.8 million common shares, and 168.7 million convertible shares, for consideration of C$332 million. A further C$62 million will be provided via the assumption of debt.

The rationale for the transaction is the combination of the tech developed individually by each firm, with aims to accelerate and modernize electrification. When SEA’s SEA-Drive propulsion tech is integrated with the Exro Coil Driver, it is said to represent an end-to-end solution with improved performance and cost of ownership for commercial vehicles.

SEA currently has multi-year commitments in place with Mack as well as Hino, and on a combined basis the company estimates that it will delivery more than 1,000 propulsion systems in 2024 to the OEMs – which Exro says will drive profitability within 12 months of the merger completing. The Mack agreement amounts to 5,000 systems to be delivered over five years, while Hino consists of 3,500 systems over three years.

On top of this, it is expected that the target market will grow to include everything from passenger vehicles to that of large commercial trucks.

“Our merger with SEA not only creates significant revenue and cost synergies, but positions Exro to amplify its growth with new partners while continuing to develop our existing relationships. Having come to know SEA and its management team from doing business with them over the past several years, I have great confidence that this acquisition will bolster our competitive positioning in the EV technology space while providing significant value potential for our shareholders,” commented Exro CEO Sue Ozdemir on the combination.

From a management perspective, Ozdemir will continue as CEO of the resulting company, while Tony Fairweather is to take on the role of Chief Product Officer, and Darrell Bishop will become CFO. Exro’s Chairman, Rod Copes, will also remain in his role, while the remaining eight seats will feature a combination of directors from both firms.

As part of the transaction, the company intends to raise $30 million, which is being conducted through Canaccord Genuity on a bought deal basis. $12 million in debt financing has also been secured by the company.

The transaction is slated to close by the end of the first quarter of 2024, subject to the approval of Exro shareholders.

Exro Technologies last traded at $1.11 on the TSX.

Information for this story was found via Sedar and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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