Electric vehicle chassis maker Motiv Power Systems is talking to special purpose acquisition companies about tying the knot. With proven technology and growing orders, the early stage growth company seems an ideal candidate for a SPAC dowry.
“We have been talking to a number of different SPACs,” Motiv CEO Matt O’Leary told FreightWaves. “This is a little bit like getting married. I mean, there has to be a good alignment between the target company and the SPAC, both in terms of the mission and the growth plan for the company.”
The COVID pandemic has slowed Motiv’s progress because of delays in getting Ford Motor Co. F-59 and F-53 stripped chassis that Fontaine Modifications upfits from the nearby Detroit Chassis Center that provides the building blocks for Motiv’s business.
“We’re just starting to get traction on building,” O’Leary said. “I think we’ll see a little bit of headwinds in the next month or so as we get through this really bleak winter. But after that, we’ve got a strong order book. We’ve got the new technology ready to go. And, as we get into next year, we’ll certainly be a prime target for a SPAC or something like that,” he said.
Fitting the target profile
Motiv fits the SPAC hunter’s target. It’s young, though technically not a startup since it was founded in 2009. It is generating some revenue. Its fifth-generation electrification technology is proven and spreading by word of mouth to pickup-and-delivery fleets.
More than 210 special purpose acquisition companies – shell companies created solely to find a company with which to merge and go public – have been formed this year, according to SPAC Insider. The average raised in initial public offerings and private equity investments in SPACs this year is $342.4 million.
The target company gets the money when the SPAC and the target company combine.
Such a financial boost could propel Motiv, which in August arranged to tap up to $15 million from its largest shareholder in exchange for operating cash. GMAG Holdings Corp. agreed to swap cash for convertible notes that will grow its stake in Foster City, California-based Motiv.
SPACs typically want companies that can justify a $1 billion valuation, according to Mark Saraiva, Cowen Inc. managing director and head of its transportation group.
“We certainly fit within the scope of several SPACs that we’ve talked to,” O’Leary said. “I won’t get into valuation. I mean, it’s a matter of a negotiation between the company and the SPAC. But we’re certainly in that range.”
In October 2019, Winnebago Industries and GMAG invested $60 million in Motiv, which helped pay off debt and pay for a second engineering center near its Detroit manufacturing base.
Green transport for reusable linens
Motiv customizes electric chassis for a variety of customers, including Winnebago (NYSE: WGO), an early investor.
“In the medium duty space, particularly Class 5 to 7, there really isn’t one vehicle that can go across all the different verticals, because it’s so fragmented,” O’Leary said. “There really isn’t a purpose-built vehicle that works.”
On Tuesday, Motiv announced the deployment of four all-electric step vans to American Linen & Supply Co. (Alsco), the world’s largest uniform service company in business since 1889.
“The thing I love about Alsco is, they’ve been around for 130 years,” O’Leary said. “How often do you get to work with 130-year-old company really looking at recycling and being green. And they’ve had this vision for a long time. It’s just like the perfect fit.”
Motiv starts small and counts on the reliability of its powertrains to win more business.
“A lot of times our competitors show up with brochures. We show up with an actual demo vehicle, so they can feel the technology and how it works,” O’Leary said. “Several of these fleets are jumping in and ordering and reordering.”
AmeriPride Services, formerly owned by Alsco, merged with Aramark (NYSE: ARMK) Uniform Services. AmeriPride started with 10 Motiv-equipped vehicles, ordered 21 more and has another pending order. Bimbo Bakeries USA, the nation’s largest bakery company, started with five electric trucks and ordered 23 more with 100 more expected to be deployed in 2021.