Xos, Inc., a prominent manufacturer of electric trucks, and ElectraMeccanica, a noted electric vehicle designer, have announced a definitive agreement for a transformational all-stock transaction. This strategic merger is set to considerably boost Xos’ financial status, offering a robust platform for growth and substantial long-term value creation.
Key Highlights:
- Significant Balance Sheet Enhancement: The merger is expected to markedly fortify Xos’ financial foundation, providing capital for further expansion of its gross margin-positive vehicle business.
- Substantial Growth Prospects: The combined entity will benefit from a significant backlog and robust growth potential, enhanced by favorable regulatory winds, such as California’s electric vehicle mandate.
- Record Deliveries: In Q4 2023, Xos delivered a record 110 units, including to major clients like FedEx Ground, UPS, and Loomis, marking a 90% growth year-over-year.
Transaction Synopsis
Under this agreement, Xos will acquire all issued and outstanding common shares of ElectraMeccanica, with unanimous approval from both companies’ boards. This union promises to escalate Xos’ market leadership in zero-emission medium-duty electric trucks. The combined company’s strengthened financial profile, along with ElectraMeccanica’s $48.5 million cash balance, will be instrumental in meeting escalating market demands.
Xos’ Competitive Edge
- Operational Excellence: Xos has already delivered over 600 units to fleet customers since 2020, boasting a 12% GAAP gross margin in Q3 2023.
- Production Capability: Xos’ Tennessee factory can produce up to 5,000 vehicles annually, demonstrating the company’s ability to scale manufacturing profitably.
- Regulatory Compliance: With U.S. federal and state incentives, Xos’ vehicles offer significant savings in energy and maintenance costs, propelling faster ownership cost recuperation compared to diesel alternatives.
Leadership Perspectives
- Dakota Semler, CEO of Xos: “This merger with ElectraMeccanica will fortify our leadership in the commercial electric vehicle market, enabling Xos to scale profitable vehicle sales.”
- Liana Pogosyan, CFO of Xos: “The combination will significantly strengthen our cash position, providing substantial growth funding.”
- Susan Docherty, CEO of ElectraMeccanica: “The proposed combination with Xos aligns with our goal to enhance shareholder value, given Xos’ industry-leading margins and its ability to service large-fleet customers.”
Proposed Transaction Details
This merger, resulting from a comprehensive strategic review by ElectraMeccanica, is structured as a court-approved plan of arrangement under British Columbia’s Business Corporations Act. Post-transaction, ElectraMeccanica shareholders will own about 21.0% of Xos, with the combined company’s board comprising nine directors from both firms. The transaction’s anticipated closure is in the first half of 2024, subject to shareholder and court approvals, among other conditions.
Advisors and Shareholder Communications
For this pivotal transaction, ElectraMeccanica and Xos have engaged Greenhill & Co. Canada Ltd., Houlihan Lokey, and legal advisors Snell & Wilmer L.L.P., and McCarthy Tétrault LLP. Shareholders are advised to contact strategic shareholder advisors and proxy solicitation agents for further details.
