DEFA14A: Workhorse to Merge with Motiv Power Systems

Workhorse Group Inc. announced a definitive merger agreement with Motiv Power Systems, Inc. to create a leader in the medium-duty EV commercial vehicle market.

Summary

• Workhorse Group Inc. (Workhorse) will merge with Motiv Power Systems, Inc. (Motiv) in an all-stock transaction.
• Motiv investors will initially own approximately 62.5% of the combined company, while Workhorse shareholders will maintain an approximate 26.5% ownership stake, subject to adjustments.
• Workhorse's existing senior secured lender will hold shares and rights representing approximately 11% ownership post-merger, reducing Workhorse shareholders' fully-diluted ownership to approximately 26%.
• The transaction aims to create a platform for scalable growth by combining Motiv's product portfolio and fleet relationships with Workhorse's vehicles, manufacturing, and dealer network.
• The combined entity expects to achieve at least $20 million in cost synergies by the end of 2026, primarily through R&D, G&A, and facility cost reductions.
• The merger is expected to close in the fourth quarter of 2025, contingent on Workhorse shareholder approval and other customary closing conditions, including debt financing commitment.
• Workhorse has already received $25 million from Motiv's controlling investor affiliates to support near-term operations and debt reduction.
• At closing, the combined company is expected to secure up to $20 million in new financing from Motiv's controlling investor affiliates and plans to raise additional financing post-transaction.

Sentiment

Score: 7

Explanation: The filing presents a strong strategic rationale for the merger, highlighting significant potential for growth, synergies, and market leadership. The immediate capital infusion and future financing plans address liquidity concerns. However, the substantial dilution for existing Workhorse shareholders and the inherent risks of integration temper the overall positive sentiment.

Positives

• Creates a platform for scalable growth by combining diverse product portfolios, manufacturing capabilities, and national dealer networks.
• Enhances scale to reduce unit costs and improve competitiveness against pure-play electric and legacy OEMs on a total cost of ownership basis.
• Provides access to complementary blue-chip customer bases, including 10 of the largest medium-duty fleets in North America.
• Establishes a strong financial foundation with a simplified capital structure and access to new financing at close and additional capital post-transaction.
• Potential to achieve at least $20 million of cost synergies by the end of 2026 through R&D, G&A, and facility cost reductions.
• The merger positions the combined company to capture new growth opportunities in the over $23 billion medium-duty trucking market.

Negatives

• Existing Workhorse shareholders will experience significant dilution, with their ownership stake reducing from 100% to approximately 26.5% (or 26% on a fully-diluted basis).
• The need for immediate ($25 million already received, up to $20 million at closing) and future additional financing indicates Workhorse's current financial challenges and reliance on external capital.

Risks

• Ability of the parties to successfully integrate their businesses and technologies, which may result in the combined company not operating as effectively and efficiently as expected.
• Risk that the 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 and the timing of the closing of the proposed transaction, including the risk that conditions are not satisfied or the transaction fails to close.
• Risk that any required regulatory approval, consent, or authorization is not obtained or is obtained subject to unanticipated conditions.
• Occurrence of any event, change, or other circumstance that could give rise to the termination of the proposed transaction.
• Unanticipated difficulties, liabilities, or expenditures relating to the transaction.
• Effect of the announcement, pendency, or completion of the proposed transaction on the parties' business relationships and operations, and difficulties in hiring or retaining employees.
• Uncertainty as to the long-term value of the combined company's common stock and potential volatility in Workhorse's securities price.
• Ability to develop and manufacture the product portfolio, including the W4 CC, 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 tariff regimes and regulatory agencies.
• 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 like California Air Resource Board's Advanced Clean Fleet.
• 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 the impact of steps taken, such as 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 and control expenses.
• Effectiveness of cost control measures and their impact on operations, 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 (Ukraine, 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 company anticipates scalable growth, enhanced market competitiveness, and a strong financial foundation to fuel future expansion. It expects to achieve significant cost synergies by the end of 2026 and plans to raise additional financing post-transaction to fund strategic execution. The merger is projected to create long-term shareholder value by positioning the entity as a leader in the medium-duty EV commercial vehicle market.

Management Comments

• "By combining with Motiv, we will be poised to deliver long-term shareholder value."
• "Motiv is the right partner to support the advancement of our combined product roadmap and capture new growth opportunities in the over $23 billion medium-duty trucking market for the benefit of our shareholders."
• "Through the advancements of our product roadmap and actions to extend our financial runway, Workhorse has been resilient in a challenging period for the industry."
• "Combining with Motiv is an important next step in our journey. Together, we will create a broader product offering, strengthen our financial position and create long-term shareholder value."
• "We look forward to completing the transaction with Motiv and continuing to deliver value for you."

Industry Context

This merger positions the combined Workhorse-Motiv entity to become a more formidable competitor in the rapidly evolving medium-duty electric commercial vehicle market. By combining complementary product portfolios, customer bases, and operational strengths, the company aims to achieve greater scale, reduce unit costs, and compete more effectively against both established legacy OEMs and emerging pure-play EV manufacturers. The strategic move addresses the need for consolidation and stronger financial footing within the capital-intensive EV sector, aiming to capitalize on the projected $23 billion medium-duty trucking market.

Comparison to Industry Standards

• The filing states the merger will enable the combined company to "more effectively compete with the industry's pure-play electric and legacy OEMs on a total cost of ownership basis." However, specific comparable companies, projects, or current results are not detailed in this filing.
• The target of at least $20 million in cost synergies by the end of 2026 is a specific internal goal, but no industry benchmark for such synergy realization in similar mergers is provided.

Legal Proceedings

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

Related Party Transactions

• Entities affiliated with Motiv's controlling investor have provided Workhorse with $25 million in near-term liquidity.
• Entities affiliated with Motiv's controlling investor are expected to provide up to $20 million in new financing to the combined company at closing.

Stakeholder Impact

• **Shareholders:** Existing Workhorse shareholders will experience significant dilution (ownership reduced to ~26.5% or 26% fully diluted) but are offered participation in the upside of a larger, more competitive entity with potential for long-term value creation and synergies.
• **Employees:** The merger aims for cost synergies, which could imply workforce adjustments, but also promises a stronger, more scalable platform for growth.
• **Customers:** The combined entity will offer a broader product offering and enhanced ability to serve large medium-duty fleets, potentially leading to increased customer contact and confidence.
• **Suppliers:** Enhanced scale and reduced unit costs could impact supplier relationships and pricing dynamics.
• **Creditors:** The transaction includes provisions for paying down debt and securing new financing, which could improve the combined company's credit profile.

Next Steps

• Workhorse shareholders are required to vote FOR the transaction with Motiv and all related proposals at the upcoming Annual Meeting.
• The Workhorse Annual Meeting is scheduled for November 12, 2025.
• The transaction is expected to close in the fourth quarter of 2025, subject to shareholder approval and customary closing conditions, including debt financing commitment.
• The combined company plans to raise additional financing after the transaction closes to fund its strategic execution.

Key Dates

Recommendation

The merger with Motiv Power Systems is a transformative strategic move for Workhorse, offering significant potential for scalable growth, cost synergies, and enhanced market competitiveness in the medium-duty EV sector. The immediate capital infusion and plans for future financing address critical liquidity needs. However, the substantial dilution for existing Workhorse shareholders (reducing ownership to approximately 26% fully diluted) introduces considerable uncertainty regarding immediate share price performance. While the long-term outlook appears more robust, execution risks related to integration, synergy realization, and ongoing capital requirements warrant a cautious approach. A 'hold' recommendation is appropriate for seasoned investors to observe the integration process and the combined entity's ability to deliver on its strategic objectives and financial projections before making further investment decisions.

Keywords

Workhorse Group Inc., Motiv Power Systems Inc., Merger Agreement, Electric Vehicles, EV Commercial Vehicles, Medium-Duty Trucks, Shareholder Value, Cost Synergies, Capital Structure, SEC Filing, Corporate Governance, Financial Reporting