EV Maker Arrival to Come Public in a SPAC Reverse Merger

After jumping by more than a third in the past two trading sessions, special-purpose acquisition company (SPAC) CIIG Merger Corp. (NASDAQ: CIIC) traded up another 26% early Thursday following a Wednesday announcement of a deal with electric vehicle (EV) maker Arrival.

Luxembourg-based Arrival is building commercial vehicles like delivery vans and buses in facilities it calls Microfactories that require low capital expenditure and a smaller footprint than a traditional auto plant. Because the company plans to build all its vehicles on the same platform, it says it can deploy a new Microfactory anywhere in the world within six months to build customized vehicles for the local market.

The agreement with CIIG will result in a new company named Arrival Group that expects to trade on the Nasdaq under the ticker symbol ARVL. The transaction is expected to close in the first quarter of 2021.

According to a presentation to investors, once the initial public offering has been completed, Arrival will have raised about $660 million in new capital. Some $400 million will be raised in a private investment in public equity (PIPE) offering that includes, among other investors, BlackRock, Fidelity, BNP Paribas and Wellington. That implies that CIIG will kick in the remaining $260 million, an amount that the company reported as restricted cash at the end of September.

The transaction implies that Arrival has a fully diluted pro forma enterprise value of $5.39 billion, just 0.4 times its expected 2024 revenue of $14.1 billion. Existing Arrival shareholders are expected to receive about 88% of the pro forma equity.

The company currently has an order valued at $1.2 billion for 10,000 of its EVs from United Parcel Service Inc. (NYSE: UPS) and an option UPS may exercise for another 10,000 units. UPS’s venture arm also made an investment of undisclosed size in Arrival in January at the same time that the delivery giant placed its order for the electric vans.

Just ahead of the UPS investment and order, South Korea’s Hyundai invested €100 million (about $118 million) in Arrival at a pre-money valuation of €2.9 billion ($3.4 billion).

Arrival’s first vehicles are expected to roll off the production line in the fourth quarter of next year, and the company expects to have four vehicle designs on the market by 2023.

CIIG stock traded up about 28% in the late morning Thursday, at $17.10 in a 52-week range of $9.30 to $18.24, a high posted earlier in the day.

CIIG Merger Corp. (NASDAQ: CIICW) warrants traded up nearly 22% at $4.63, after posting a new high of $5.25. Each warrant is redeemable for one-half share of CIIG common stock.

CIIG Merger Corp. (NASDAQ: CIICU) units traded up about 28% at $19.48, after posting a new high of $20.50. Each unit includes one share of common stock and one warrant for half a share.