Xos, Inc. and ElectraMeccanica announced that they have entered into a definitive arrangement agreement, pursuant to which Xos will acquire all of the issued and outstanding common shares of ElectraMeccanica in an all-stock transaction.
The members of the boards of directors of both companies unanimously approved the proposed transaction.
The proposed transaction represents an opportunity for Xos to meet the growing demand for zero-emission medium-duty electric trucks by providing Xos with access to ElectraMeccanica’s cash balance which is expected to be approximately $48.5 million at the time of the closing of the transaction.
Xos delivered over 600 units to fleet customers since 2020 and recorded approximately 12% GAAP gross margin in the third quarter of 2023.
Over the first nine months of 2023, Xos reported revenues of $26.1 million and a total operating loss of $53.1 million. That loss narrowed from $85.4 million for the first nine months of 2022.
Stackable U.S. federal and state incentives can provide customers with incentives equal to over 75% of the purchase price of a new Xos vehicle.
Such incentives, combined with up to 80% reduction in energy costs and up to 40% reduction in scheduled maintenance costs versus diesel, mean that Xos’ vehicles can accelerate total cost of ownership (TCO) savings compared with diesel alternatives to within 12 months of purchase.
“For seven years, Xos has designed and manufactured commercial electric vehicles that are relied upon by several of the world’s largest and most recognizable commercial fleets," said Dakota Semler, CEO and chairman of Xos. "We believe leveraging ElectraMeccanica’s assets will strengthen Xos’ leadership position in the robust commercial truck market and allow Xos to scale profitable vehicle sales.”
Proposed Transaction Details
The proposed transaction between Xos and ElectraMeccanica is the culmination of a formal process initiated by ElectraMeccanica’s Board of Directors to explore a range of possible strategic alternatives for optimizing ElectraMeccanica’s assets and generating sustained shareholder value while still managing potential risks.
Since October 2023, the Strategic Committee of the ElectraMeccanica Board, with the assistance of its advisors and management, evaluated many former potential merger and acquisition candidates as well as new ones, including Xos.
ElectraMeccanica’s Strategic Committee, comprising Steven Sanders (Chairman), Mike Richardson (Vice Chairman), Dietmar Ostermann (Chair of the Strategic Committee), and Luisa Ingargiola (Independent Director) made a unanimous, formal recommendation to the ElectraMeccanica Board to pursue a combination with Xos and to proceed with the proposed transaction.
Following the close of the transaction, ElectraMeccanica’s shareholders will own approximately 21.0% of Xos, subject to certain adjustments as set forth in the definitive arrangement agreement.
The transaction is intended to be completed, subject to the definitive arrangement agreement, by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia), whereby Xos will acquire all of the issued and outstanding ElectraMeccanica Shares in an all-stock transaction.
The board of directors of the combined company will consist of nine directors, comprising six directors designated by Xos, including Xos co-founders Dakota Semler and Giordano Sordoni (who also serves as Xos’ Chief Operating Officer), and three directors designated by ElectraMeccanica.
The management team of Xos will continue to manage the business of the combined company following the completion of the transaction.
The board of directors of each company approved the proposed transaction, which is expected to close in the first half of 2024, subject to the satisfaction or waiver of closing conditions, including, among others, required approvals of Xos’ stockholders and ElectraMeccanica’s shareholders, court approval of the transaction, certain third-party approvals, and other customary closing conditions.
The proposed transaction requires approval by at least 66 2/3% of the votes cast by the holders of ElectraMeccanica Shares present in person or represented by proxy at a special meeting of ElectraMeccanica’s shareholders to be called to consider the proposed transaction, as well as approval by Xos’ shareholders.
All directors of each company have entered into support and voting agreements (subject to certain rights of withdrawal) for all of their shares which will also subject them to a 120-day restricted period.
This cumulatively represents approximately 2.74 million ElectraMeccanica Shares (inclusive of restricted share units and deferred shares units), or approximately 2.2% of ElectraMeccanica’s fully diluted outstanding shares, and approximately 3.23 million Xos Shares (inclusive of restricted stock units), or approximately 49.5% of Xos’ fully diluted outstanding shares.
ElectraMeccanica has retained CBRE, Inc., to sub-lease its 235,000-square-foot facility in Mesa, Arizona.
Originally posted on Automotive Fleet