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LORDSTOWN, Ohio – Lordstown Motors Corp. and global technology company Hon Hai Technology Group today announced that they have reached an agreement in principle to jointly work on Lordstown Motors ‘electric vehicle programs at Lordstown Motors’ 6.2 million production and assembly plant. square footage here.
The deal, if fully concluded, would mean Foxconn would pay Lordstown Motors $ 230 million for its plant and buy $ 50 million of common stock in the EV startup.
Beyond certain customary provisions, the agreement is non-binding and subject to negotiation and execution of final agreements, the companies said.
The parties have entered into a subscription agreement, under which Foxconn will purchase approximately $ 50 million of Lordstown Motors’ common stock directly from Lordstown Motors at a price of $ 6.8983 per share, the volume-adjusted average daily price. during the last 15 trading days preceding the execution of the agreement in principle. Foxconn has agreed to hold these shares for a specified period.
The deal between the two companies would allow Lordstown Motors to leverage Foxconn’s technology and manufacturing expertise, as Lordstown Motors continues production of electric vehicles at its Ohio plant. The goal of the partnership is to present both Lordstown Motors and Foxconn with increased market opportunities in the production of scalable electric vehicles in North America.
The agreement provides for the following:
- Lordstown Motors and Foxconn will use commercially reasonable efforts to negotiate a definitive agreement whereby Foxconn would purchase the Lordstown facility, excluding the hub motor assembly line, battery module and power plant assets. Lordstown Motors’ packaging line, certain intellectual property rights and other assets excluded, for $ 230 million.
- The two entities would also negotiate a contract manufacturing deal, which would be a condition of closing the purchase of the facility, whereby Foxconn would manufacture Lordstown Motors’ full-size Endurance pickup truck at its Lordstown plant. Lordstown Motors would also agree to provide Foxconn with certain rights regarding future vehicle programs.
- Concurrent with the closing of the definitive agreements, Lordstown Motors would issue warrants to Foxconn exercisable until the third anniversary of closing for 1.7 million common shares at an exercise price of $ 10.50 per share. .
- The parties have agreed to explore licensing agreements for other pickup truck programs.
After the final agreements close, Lordstown Motors would enter into a long-term lease for part of the existing facility for its Ohio-based employees, and Foxconn would offer employment to the agreed Lordstown operating and manufacturing employees.
Young Liu, Chairman of Hon Hai Technology Group, said, “We have high expectations from this partnership that we will be able to successfully integrate our resources with Lordstown Motors. In addition to meeting the goal of moving forward in our schedule to establish electric vehicle production capacity in North America, this also reflects Foxconn’s flexibility in providing design and production services for different vehicle customers. electric. This mutually beneficial relationship is a milestone for Foxconn’s EV business and our transformation strategy. I believe the innovative design of the Endurance pickup truck, with its unique hub motors, provides a beneficial user experience and manufacturing efficiency. It will undoubtedly thrive as part of our partnership and our business model. “
Additionally, this facility would serve as a quick-to-market asset that would also support Foxconn’s partner and customer, Fisker Inc.
Daniel Ninivaggi, CEO of Lordstown Motors Corp., said: “We are excited about the prospect of joining forces with a world-class smart manufacturer like Foxconn and believe this relationship would bring operational, technological and chain benefits. supply to our business and would accelerate global scale-up. vehicle production and increase employment at the Lordstown plant. The partnership would allow Lordstown Motors to take advantage of Foxconn’s extensive manufacturing expertise and profitable supply chain, while allowing Lordstown Motors to focus on bringing Endurance to market, developing offerings of services for our fleet customers and the design and development of new innovative vehicle models. . “
Lordstown Motors has also updated its 2021 financial outlook as follows:
- Capital Expenditures – unchanged in total from $ 375 million to $ 400 million, including changes in the timing of tooling and equipment purchases and the inclusion of planned tooling expenditures previously included in R&D spending.
- SG&A expenses – $ 105 million to $ 120 million, up from $ 95 million to $ 105 million, mainly due to higher legal and professional fees.
- R&D expenses – $ 320-340 million, up from $ 310 million to $ 320 million, largely due to increased prototyping and pre-production expenses, reduced by the impact of shifting planned spending from flexible tooling to capital spending, as mentioned above.
- The cash balance at September 30 is $ 210 million to $ 240 million, down from $ 225 million to $ 275 million, which includes approximately $ 20 million of proceeds from the issuance of common shares under the agreement. the company’s stock purchase in August and September, but excludes the proceeds from the $ 50 purchase by Foxconn. million common shares of the company as announced today.
- These updated financial projections for pre-production expenses can be affected by many factors, including the results of regulatory validation and testing, supply chain constraints and delays, and timing of procurement. tools and equipment. Lordstown Motors has engaged Jefferies LLC to advise the Company on other financing alternatives, which may include private or public private equity transactions, debt financings, or a combination thereof.
SOURCE: Lordstown Motors. Image: Lordstown Motors.
Copyright 2021 The Business Journal, Youngstown, Ohio.
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