Hon Hai (2317-TW) and the American electric truck startup Lordstown (RIDE-US) reached an electric vehicle cooperation agreement. The total transaction value is 280 million U.S. dollars. Hon Hai will buy the Lordstown Ohio Depot for 230 million U.S. dollars and invest 50 million U.S. dollars Obtain common stock. This agreement is not legally binding and is still subject to negotiation between the two parties.
Lordstown Chief Executive Daniel Ninivaggi said in the United States on Thursday (30th) that the two companies have concluded a non-legally binding agreement to sell factories and real estate to Hon Hai for US$230 million, excluding some assets. The two parties also signed an agreement to acquire shares of Lordstown worth 50 million US dollars by Hon Hai, which will be manufactured by Hon Hai at the plant to accelerate the launch of Endurance electric pickup trucks.
According to Ninivaggi, the agreement between the two parties is based on the specific cost of the electric pickup truck. Lordstown will pay additional fees. In the end, regardless of the outcome of the cooperation negotiation between the two parties, Hon Hai will immediately subscribe for 50 million US dollars of shares.
Ninivaggi said that the two companies are scheduled to finalize the final purchase agreement before October 31, and the completion of the transaction may fall in April next year.
Bloomberg disclosed the rumors of electric vehicle cooperation earlier on Thursday, which encouraged Lordstown’s share price to open higher. It rose 21% in the early trading and still rose 8.4% to 7.98 US dollars per share. After-market cooperation news was confirmed, and Lordstown’s after-market share price continued to rise by 7.52%.
This transaction allows the two companies to obtain the resources that each other desires. Lordstown can obtain urgently needed funds to accelerate mass production and launch the company’s first electric pickup truck. Hon Hai can establish a production base in North America and create an open-source electric vehicle platform. And foundry for Fisker (FSR-US) etc.
In an interview, Ninivaggi said: “This transaction focuses on strategic cooperation and more than selling factories. We must find a way to achieve scale in the automotive industry. Hon Hai has a vision, a strong manufacturing capacity, and can use it at a faster rate than us. Let the factory run.”
Lordstown bought the Oklahoma factory that originally belonged to General Motors (GM-US) for US$20 million that year and hired 10,000 people at its peak. Lordstown is stepping up production and hopes to launch Endurance early next year. However, even if the pickup truck receives enthusiastic response from consumers, the Oklahoma plant will not be able to maximize its benefits in a short period of time. If Lordstown can sell the plant and obtain Hon Hai’s help, it can increase leverage.
