Maxwell, Struggling Battery-Technology Maker, to Sell to Tesla

Battery-technology business Maxwell Technologies has agreed to be acquired by Silicon Valley electric car company Tesla (NASDAQ: TSLA) in an all-stock deal valued at about $218 million, the San Diego-based company announced Monday.

Maxwell (NASDAQ: MXWL) said Palo Alto, CA-based Tesla would buy its shares at $4.75 apiece, a 55 percent premium over its stock price as of market close Feb. 1.

Maxwell, which makes energy-storage electronics called ultracapacitors that some automakers use alongside batteries for energy storage, saw its stock price shoot up just shy of 50 percent on the news to $4.59 as of market close Monday. Tesla’s stock price barely budged, closing Monday at $312.89 apiece, 68 cents above the prior trading day.

Plenty of other companies also manufacture ultracapacitors and similar devices, from big businesses like Panasonic to startups like MIT spinout Nanoramic Laboratories. Maxwell believes it can remain competitive but has had concerns that pricing expectations and competition would place pressure on its pricing and margins for products used in automotive and wind, according to a securities filing.

In addition to the ultracapacitors it sells, the company has developed what is called dry battery electrode technology, which it believes can reduce the cost of making the lithium-ion batteries that power electric vehicles today. In December, it sold off its high-voltage capacitor business to Renaissance Investment Foundation for $55 million, according to the presentation.

It has recently recorded several years of operating losses. In the first nine months of 2018, the company reported a net loss of about $30.2 million on revenues of $91.6 million. In the same months the year prior, Maxwell reported a net loss of about $34.4 million on revenues of about $35.8 million. As of Sept. 30, the company had $23.6 million in cash and working capital of about $67 million.

In addition to its U.S. presence, Maxwell has locations in Germany and South Korea and has about 380 employees, according to a presentation Maxwell made in January. It also has two contract manufacturers in China.

Back in 2017, in conjunction with the $23.2 million acquisition of a South Korean-based ultracapacitor company, Nesscap Energy, it underwent a restructuring, which included layoffs and other cost cutting efforts.

In May of 2018, Maxwell inked a deal with the Chinese auto group Geely, which owns brands including carmaker Volvo, to use its ultracapacitors in some of its vehicles starting in 2019.

In August, the battery tech maker sold about 7.6 million shares at $3.25 apiece to raise $23 million in a public offering.

But in a quarterly report issued in September, the company said it would need additional funding to make up for its losses going forward, and that without “significant improvement” in results and additional investment, it would likely fail to meet the terms of its revolving line of credit within a year’s time.

Maxwell, in prepared remarks, said it anticipates the Tesla deal will close in the second quarter “or shortly thereafter.” The company said its board of directors has unanimously approved the offer. Maxwell is headed by president and CEO Franz Fink, who joined the company in 2014. Founded in 1965, the company went public in 1983.

Tesla, in the first nine months of 2018, reported losses of $1.3 billion on revenues of $11.6 billion, compared to losses of $1.5 billion on revenues of $6.1 billion in the same period the year prior.

Sarah de Crescenzo is an Xconomy editor based in San Diego. You can reach her at sdecrescenzo@xconomy.com. Follow @sarahdc

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