DEFA14A: Workhorse, Motiv Merge to Create EV Truck Leader

Workhorse Group Inc. announced a definitive agreement to merge with Motiv Power Systems, Inc., aiming to create a leading North American medium-duty electric truck OEM and strengthen its financial position.

Summary

• Workhorse Group Inc. and Motiv Power Systems, Inc. are combining to form a leading North American medium-duty electric truck OEM.
• The transaction values the combined company at $105 million.
• Motiv's controlling investor will initially own approximately 62.5% of the combined company, Workhorse's existing senior secured lender will have rights to receive common stock representing approximately 11%, and Workhorse shareholders will own approximately 26.5%, subject to adjustments and future dilution.
• The merger is expected to generate $20 million in potential cost synergies by the end of 2026, primarily through R&D, G&A, and facility cost reductions.
• Workhorse completed a $20 million sale-leaseback for its Union City, Indiana manufacturing facility and a $5 million convertible secured note financing with entities affiliated with Motiv's controlling investor, providing near-term liquidity.
• The combined company is expected to obtain access to up to $20 million in new debt financing at closing, including a $10 million revolving credit facility and a $10 million ABL facility for manufacturing costs.
• The transaction is expected to close in the fourth quarter of 2025, pending Workhorse shareholder approval and other customary closing conditions.

Sentiment

Score: 7

Explanation: The merger with Motiv is a decisive strategic action to address Workhorse's challenges, including delayed customer adoption and financial runway concerns. While it involves significant dilution for existing shareholders, it aims to create a more competitive and financially stable entity with enhanced scale, product offerings, and access to capital, positioning it for long-term growth in the commercial EV market.

Positives

• Creates a broader product offering and strengthens Workhorse's nearand long-term financial positions.
• Workhorse shareholders will have the opportunity to participate in the upside of a leader in the medium-duty EV commercial vehicle market.
• Motiv's diverse product portfolio and top fleet relationships complement Workhorse's proven vehicles, manufacturing capabilities, and national dealer network.
• Expected to achieve greater scale and operational efficiency, enabling more effective competition with pure-play electric and legacy OEMs.
• Aims to capitalize on new opportunities to serve more customers with a competitively advantaged electric offering based on total cost of ownership (TCO).
• Establishes a strong financial foundation for advancing the combined product roadmap.
• Expected cost synergies of $20 million by the end of 2026 through R&D, G&A, and facility cost reductions.
• Actions to strengthen the combined company's financial position are expected to create opportunities for margin expansion and greater flexibility for future growth initiatives.
• A simplified capital structure is expected to better position the combined company to raise additional capital post-close.
• The combined company targets the $23 billion medium-duty truck segment.
• Expected manufacturing capacity of 5,000 trucks per year at the Union City facility.
• Combined customer base includes 10 of North America's largest medium-duty fleets with low overlap and significant repeat purchases.
• Near-term liquidity of $25 million provided through a $20 million sale-leaseback and a $5 million convertible secured note.
• Access to up to $20 million in new debt financing post-merger close.

Negatives

• Existing Workhorse shareholders will own approximately 26.5% of the combined company on a fully diluted basis, subject to potential adjustments and additional future dilution, indicating significant dilution.
• Shifts in the political landscape and delayed customer adoption have made gaining traction take longer than expected for Workhorse's standalone operations.
• The merger is a response to market conditions and the need to preserve cash and extend financial runway, suggesting prior financial challenges.

Risks

• Ability of parties to successfully integrate businesses and technologies, potentially leading to less effective and efficient operations than expected.
• Risk that expected benefits and synergies of the proposed transaction may not be fully achieved in a timely manner, or at all.
• Workhorse's ability to obtain shareholder approval for the transaction and the timing of closing, including conditions not being satisfied or failure to close.
• Risk that required regulatory approvals, consents, or authorizations are not obtained or are subject to unanticipated conditions.
• Occurrence of any event, change, or circumstance that could lead to termination of the proposed transaction.
• Unanticipated difficulties, liabilities, or expenditures related to the transaction.
• Effect of the announcement, pendency, or completion of the proposed transaction on business relationships and operations.
• Effect of the announcement or pendency of the proposed transaction on Workhorse's common stock prices and uncertainty regarding the long-term value of the combined company's common stock.
• Risks that the proposed transaction disrupts current plans and operations and potential difficulties in hiring or retaining employees.
• Ability to develop and manufacture product portfolio, including the W4CC, W750, and W56 and other programs.
• Ability to attract and retain customers for existing and new products.
• Ongoing and anticipated changes in the U.S. political environment, including those from the new Presidential Administration, control of Congress, and changes to regulatory agencies.
• Implementation of changes to the existing tariff regime by the new Presidential Administration and responses by foreign governments.
• Risks associated with obtaining orders and executing upon such orders.
• Unavailability, reduction, elimination, or adverse application of government subsidies and incentives, or challenges to regulations such as the California Air Resource Board's Advanced Clean Fleet regulation.
• Changes in attitude toward environmental, social, and governance matters among regulators, investors, and business partners.
• Supply chain disruptions, including constraints on steel, semiconductors, and other material inputs, and resulting cost increases.
• Limited operations and need to expand and enhance production processes to fulfill product orders.
• General inability to raise additional capital to fund operations and business plan.
• Ability to receive sufficient proceeds from current and future financing arrangements to meet immediate liquidity needs, and potential costs, dilution, and restrictions from such financing.
• Ability to maintain compliance with Nasdaq listing requirements and impact of steps taken (e.g., reverse splits).
• Ability to protect intellectual property.
• Market acceptance of products.
• Ability to obtain sufficient liquidity from operations and financing activities to continue as a going concern.
• Ability to control expenses and effectiveness of cost control measures, including employee furloughs.
• Potential competition, including shifts in technology.
• Volatility in and deterioration of national and international capital markets and economic conditions.
• Global and local business conditions.
• Acts of war (including conflicts in Ukraine and the Middle East) and/or terrorism.
• Prices charged by competitors.
• Inability to retain key members of the management team.
• Inability to satisfy customer warranty claims.
• Outcome of any regulatory or legal proceedings, including with Coulomb Solutions Inc.
• Ability to realize the benefits of the sale and leaseback transaction of the Union City Facility.

Future Outlook

The combined Workhorse and Motiv company expects to achieve greater scale and efficiency, enabling more effective competition in the medium-duty EV commercial vehicle market. They anticipate strengthening their financial position, expanding margins, and having greater flexibility for future growth initiatives. The simplified capital structure is expected to facilitate raising additional capital post-close to fund strategic execution. The merger is projected to close in the fourth quarter of 2025.

Management Comments

• Over the last few months, Workhorse has made important progress advancing our product roadmap – we are proving the capabilities of our W56 vehicle, securing purchase orders and delivering vehicles for customers.
• At the same time, we have been preserving cash and extending our financial runway.
• While I remain very optimistic in the long-term commercial EV transition, shifts in the political landscape and delayed customer adoption have made gaining traction take longer than expected.
• By combining with Motiv, we will create a broader product offering, strengthen Workhorse’s nearand long-term financial positions and provide Workhorse shareholders the opportunity to participate in the upside of a leader in the medium-duty EV commercial vehicle market.
• We believe Motiv is the right partner for Workhorse. We are a compelling and complementary fit, with Motiv’s diverse product portfolio and top fleet relationships joining Workhorse’s proven vehicles, manufacturing capabilities and national dealer network.
• Together, we expect to have more scale and the ability to operate more efficiently.
• With a simplified capital structure, the combined company is also expected to be better positioned to raise additional capital post-close.
• Workhorse is poised to win the EV transition. With this transaction, I believe we are even better positioned to do so.
• There have been many moments over the last few years where we could have folded, like many others in the industry have. But we maintained our resilience because we believe so strongly in our ability to advance our roadmap for the benefit of our customers and our shareholders.

Industry Context

The announcement reflects the ongoing consolidation and strategic realignments within the nascent but growing commercial electric vehicle (EV) market. Companies are seeking scale, diversified product portfolios, and stronger financial foundations to navigate political shifts, delayed customer adoption, and intense competition from both pure-play EV startups and established legacy OEMs. The focus on the medium-duty truck segment highlights a key area of opportunity for electrification, driven by total cost of ownership advantages over traditional gas/diesel vehicles.

Comparison to Industry Standards

• The combined company expects to compete more effectively with pure-play electric and legacy OEMs in the industry.
• The filing does not provide specific comparable companies, projects, or results to benchmark against global industry standards.

Legal Proceedings

• Outcome of any regulatory or legal proceedings, including with Coulomb Solutions Inc.

Related Party Transactions

• Motiv's controlling investor is providing a $20 million sale-leaseback for Workhorse's Union City facility and a $5 million convertible secured note financing.
• Entities affiliated with Motiv's controlling investor are expected to provide up to $20 million in debt financing to the combined company at closing.

Stakeholder Impact

• Shareholders: Existing Workhorse shareholders will experience significant dilution, owning approximately 26.5% of the combined company, but gain participation in a potentially stronger, more competitive entity.
• Employees: The merger aims for cost synergies, which could imply workforce adjustments, but also positions the combined company for sustainable growth, potentially securing future employment.
• Customers: Expected to benefit from a broader product offering, more competitive electric vehicles, and a stronger, more stable OEM.
• Suppliers: Potential for increased scale and more stable demand from the combined entity.
• Creditors: Workhorse's existing senior secured lender will have rights to receive common stock representing approximately 11% of the combined company, and debt owed to them will be paid down. New debt financing will be provided by Motiv's affiliated entities.

Next Steps

• Workhorse will provide information to shareholders soon on how to vote on the transaction.
• Workhorse intends to file a Proxy Statement on Schedule 14A with the SEC.
• The combined company will seek to raise additional financing to fund its go-forward strategic execution post-merger close.
• The transaction is expected to close in the fourth quarter of 2025, subject to shareholder approval and other customary closing conditions.

Key Dates

Recommendation

The merger is a necessary strategic move to address Workhorse's challenges and improve its long-term viability in a competitive market. While it offers potential for increased scale, synergies, and a stronger financial foundation, the significant dilution for existing shareholders and the inherent risks of integration and future capital raises warrant a cautious approach. Investors should hold to observe the successful execution of the merger, integration, and the realization of stated synergies before considering further investment.

Keywords

Electric Vehicles, Commercial Trucks, Medium-Duty Trucks, EV OEM, Merger, Workhorse Group, Motiv Power Systems, SEC Filing, Financial Reporting, Corporate Governance, Risk Management, Strategic Business Analysis, Shareholder Value, Supply Chain, Capital Raise, Liquidity, Cost Synergies