Electric-car company Tesla (NASDAQ:TSLA) is acquiring battery technology company Maxwell Technologies (NASDAQ:MXWL) in an all-stock transaction valued at $218 million, Maxwell announced in a press release on Monday.
The acquisition, which is expected to close in the second quarter of 2019 or shortly after, comes as Tesla is ramping up production of its vehicles and is aiming to lower the costs of its batteries to help bring cheaper versions of its Model 3 to market.
Image source: Tesla.
Maxwell stock soars
Shares of Maxwell stock soared on Monday, rising approximately 50% as of 10:20 a.m. EST. The stock’s rise makes sense. Shares rose from $3.07 on Friday to $4.61 as of this writing — not far from the $4.75 price the transaction is expected to close at next quarter.
While the transaction is subject to regulatory approvals, customary closing conditions, and other terms, Maxwell’s board of directors has unanimously approved the deal and has recommended shareholders accept the offer.
“We are very excited with today’s announcement that Tesla has agreed to acquire Maxwell. Tesla is a well-respected and world-class innovator that shares a common goal of building a more sustainable future,” said Maxwell CEO Dr. Franz Fink. “We believe this transaction is in the best interests of Maxwell stockholders and offers investors the opportunity to participate in Tesla’s mission of accelerating the advent of sustainable transport and energy.”
Tesla’s choice to pay for the company only in stock comes as the automaker has a large debt payment due in March, which the company plans to pay for in cash. While an all-stock purchase of Maxwell will lead to dilution for Tesla shareholders, it will help Tesla continue making progress on its goal to de-risk its balance sheet.
Tesla stock is down about 1% as of 10:20 a.m. EST.
Maxwell fits the characteristics of Tesla’s typical acquisitions. The electric-car company usually buys companies with technologies that can help it accelerate its mission to further sustainable energy and ones that are relatively small relative to Tesla’s total market capitalization.
Maxwell’s website offers the following product description of the company’s ultracapacitors:
Our recently developed lithium-ion capacitors are energy storage devices with the power characteristics of an ultracapacitor combined with enhanced energy storage capacity approaching that of a battery. They are uniquely designed to address a variety of applications in the rail, grid, and industrial markets where energy density and weight are differentiating factors.
Tesla is always aiming to improve the energy density and lower the weight of its batteries, as improvements on both fronts can ultimately lead to cost reductions for the company in both its energy-storage and electric-vehicle segments.