Michael Patterson is a serial entrepreneur who has an inscribed baseball bat for every company he starts, grows and sells. His latest move: taking over 76-year-old Crane Carrier Co. to introduce battery-electric refuse trucks under the name Battle Motors. He has a bat for it too.
Serial entrepreneur flips the script
Michael Patterson has little to prove in the world of entrepreneurship. He has started and sold four companies. For each, the 54-year-old Patterson has an inscribed baseball bat symbolizing his goal of “hitting it out of the park whenever I do a new company.”
Battery pack startup Romeo Power, which is in the process of being acquired by its largest customer, Nikola Corp., is the outlier to a series of successes. Patterson left Romeo in 2021, pivoting to acquire legacy refuse and utility truck manufacturer Crane Carrier Co. instead of starting over again.
Battle Motors is growing fast following the rebranding of Crane. Patterson has raised significant capital — $270 million in two rounds through last month. Instead of startup costs, he inherited a workforce, an orderbook and some reliable equipment designs.
Sorting out the competition
Battle sells 95% diesel trucks and a few that run on compressed natural gas.
Patterson is transitioning to battery-electric as Battle slugs it out with Peterbilt, which has about 40% of the refuse market, followed by Mack Trucks with about 30%. Autocar, the 125-year-old elder among vocational truck makers, and Battle each have about 10% share. Oshkosh Truck and other small operators split the rest.
“My advantage is that Mack and Peterbilt have on-highway trucks. That’s where their bread and butter is,” Patterson said. “They’ve got to take all the parts they would use for refuse [and] take them to their big trucks where those two compete fiercely.”
This isn’t just wishful thinking. Battle will build about 1,000 trucks this year at its expanding operation in New Philadelphia, Ohio. That’s up from 300 in 2021. Patterson forecasts 2,700 trucks next year, half of them already ordered with purchase orders from municipalities. Electric models will account for about 15% of next year’s production.
“I’d like to get from around 15% to 25%. Being in the refuse space, it’s just really ideal and it’s a great [battery-electric] application.”
Drawing on past relationships
When Patterson was growing Romeo, he had Tier 1 suppliers BorgWarner Inc. and Republic Services Group as investors. He buys electric motors from BWA’s Cascadia Motion subsidiary. But he won’t talk about Republic, the nation’s No. 2 refuse hauler, other than cryptically offering that “I’m enjoying the relationship.”
While pitching Romeo battery packs to Crane, he learned the 76-year-old manufacturer might be available. “And that’s kind of how I fell in love with the company.”
An ill-advised SPAC
Patterson founded Romeo in 2015 after selling InAuth, a mobile authentication and fraud detection company serving global financial service organizations to American Express. He started Romeo with the intent of bringing consumer batteries to impoverished counties. When capital markets showed no interest, Patterson switched to making batteries for electric vehicles.
“We happen to have put together quite a fantastic team of battery engineers. We pivoted into the EV space and that became the Romeo that everyone actually found out about.”
Patterson doesn’t quite express regret over merging with a special purpose acquisition company RMG Acquisition Corp. and going public just before SPACs fell out of favor with investors.
“Let’s just say, for example, you just had raised money at a hundred million dollar valuation and there’s SPACs coming at you offering money at an $800 million valuation. You’re thinking, ‘I want to keep the company going,’ right? I mean, that sounds insane, but it’s the best thing for my employees and my product.”
What followed Romeo’s Dec. 31, 2020, public debut “was just a really ugly couple of years.” The pandemic. Supply shortages. A breakup of a key joint venture. BorgWarner purchased Europe’s Akasol for $880 million to make battery packs, hastening the end of a 50-50 joint venture with Romeo, of which it purchased 20% in 2019.
No irony
Meanwhile, Nikola was emerging from the scandal tied to founder Trevor Milton, closing in on production of the Class 8 battery-electric Tre daycab. But Romeo underperformed for its biggest customer to the point where Nikola cut a long-term deal with Proterra, another startup, for future battery packs.
As he looks at Nikola’s pending purchase of Romeo (see below), Patterson points to Nikola’s ignominious fall in late 2020 as ushering in hard times for SPAC mergers that followed.
“Just try to find a winner, OK? A bunch of these are trending right down to where Romeo is.”
What does he think of Nikola being a possible savior of Romeo and its 400 jobs?
“I wouldn’t say it’s ironic. I would say it’s a better ending to the story than what could have happened and what may happen to a lot of these other SPAC-led companies. Nikola is going to end up with some pretty advanced battery technology. There’s a lot of smart people involved in the design of these packs.”
We’ve seen this movie before
Nikola is beating the bushes — again — to motivate shareholders. This time it is chasing holders of Romeo Power to exchange shares in the battery maker for partial shares in Nikola. That would allow the electric truck maker to complete its $144 million all-stock purchase of Romeo and secure its battery supply.
The deadline for Romeo stockholders to tender their shares is midnight, Eastern time, next Wednesday. If less than a majority of the outstanding shares of Romeo common stock are tendered, the deal could fall apart and no shares would be exchanged. If a deal is cncluded, Romeo shareholders would hold about 4.5% of Nikola on a pro forma basis.
Romeo shareholders may be skittish because Nikola shares, which closed Thursday at $3.54, are trading at less than half its $7.18 price when it made its Aug. 1 offer to exchange each Romeo share for 0.1186 of a Nikola share. Romeo traded at 43 cents a share on July 29, the day to which the exchange offer was pegged. It closed at the same 43 cents on Thursday.
Nikola just concluded a protracted proxy battle to get its own shareholders to vote in favor of a proposal to increase the number of authorized shares in the company that could be used to raise capital for scaling the business. Nikola could again extend the deadline for the tender offer.
That might have been easier if indicted founder Trevor Milton had not voted against the proposal, forcing Nikola to adjourn its June 1 annual meeting three times before attracting enough votes to pass the measure.
Briefly noted:
Transitioning the nation’s power grid to renewable fuels could prevent 67,000 premature deaths by 2050, according to a report from the American Lung Association. … Former Pacific Gas & Electric CEO Andrew Vesey is joining Nikola’s board. … Cummins Inc. will design and manufacture a 20-megawatt electrolyzer system for Atura Power’s Niagara Hydrogen Centre in Niagara Falls, Ontario. Electrolyzers split water into hydrogen and oxygen. … Separately, Cummins is closer to an initial public offering for its filtration business, setting up a $1 billion credit agreement to help stand up a separate business. Cummins filed confidentially with the SEC in April for a possible IPO of the division. … Startup Solo AVT is testing its driverless electric cabs on a closed track in Los Angeles.
That’s it for this week. Thanks for reading. Click here to get Truck Tech via email on Fridays.
Alan