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Impact Of Tesla's Maxwell Technologies Acquisition Uncertain On Existing Maxwell Fleet Business

Impact Of Tesla's Maxwell Technologies Acquisition Uncertain On Existing Maxwell Fleet Business

Tesla's acquisition Maxwell Technologies could have an impact on Maxwell's fleet business, which counts more than 7,000 trucks using its products.

For the first time in more than a year, Tesla Inc (NASDAQ: TSLA) has announced an acquisition, and it is a company with a presence within the trucking industry.

Elon Musk's company reached a deal to acquire Maxwell Technologies Inc. (NASDAQ: MXWL) for $4.75 per share, or approximately $218 million, in an all-stock transaction. The per share price is nearly a 55 percent premium over Maxwell's closing price of just over $3 on Friday, February 1st. Maxwell stock closed Monday at $4.59.

The deal is expected to close in the second quarter.

Maxwell is known in the trucking space for its ultracapacitors, first launched in the space in 2011. Back then, few knew how to use them, but they have gained traction in recent years. Called engine start modules (ESM), the devices are built into a Group 31 battery shell and replace one of the truck's onboard batteries. An ESM includes up to 12 ultracapacitors, which store energy to be used when starting a commercial vehicle.

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The company said that the ESM is an isolated system and does not drain a truck's batteries. Even if the truck's batteries are drained of all power, the ESM will start the vehicle, Maxwell has said. This is advantageous in areas where vehicles must use battery power to run auxiliary items such as in-cab comforts. It is also useful for vehicles that stop and start continually during the day, such as local delivery vehicles.

Maxwell's ESM models provide between 900 and 1,800 cold cranking amps (CCA) at start, and recharge in less than 15 minutes. The product can prevent an expensive jump-start call.

It is unclear what impact the Tesla acquisition would have on Maxwell's fleet business and whether Tesla would allow Maxwell to consider selling to fleets. Tesla is building the Tesla Semi, an all-electric Class 8 truck model.

Maxwell also produces grid energy storage systems and a line of ultracapacitor modules in various sizes ranging up to 48 volt systems.

Analysts reacted positively to the news, with several suggesting the acquisition will help Tesla control battery costs and provide access to advanced battery technology that Maxwell has in its portfolio.

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"We see the deal offering three layers of synergies for Tesla relative to other would-be acquirers," wrote Jeffrey Osborne, an analyst with Cowen and Company. "Namely, applications in automotive, grid applications combining lithium ion batteries and ultracapacitors for grid stabilization and ancillary services, and opportunities for Tesla to improve energy density, and thus range, with Maxwell's dry electrode capability and graphite expertise."

CFRA analyst Garrett Nelson believes the move could lower Tesla's production costs and improve battery performance.

"This seems like a low-risk, bolt-on acquisition for Tesla with significant upside potential, and we also like the fact they're using stock and not cash to pay for it," Nelson said.

"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 Dr. Franz Fink, President and Chief Executive Officer of Maxwell. "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."

The deal still must be approved by shareholders. Tesla's last acquisition was in late 2017 when it purchased Perbix, a manufacturing automation company.

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