China self-driving truck start-up agrees $3.3b SPAC merger
Plus, a China-based autonomous driving technology developer that specializes in trucks, has agreed to merge with a special purpose acquisition company (SPAC) at a valuation of $3.3 billion.
It is set to become the second Chinese company of its type to go public in the US after TuSimple raised $1.35 billion through a traditional IPO in April. TuSimple now has a market capitalization of approximately $8 billion. Both companies have received substantial private equity funding.
Plus secured a $220 million round as recently as early April, with FountainVest Partners and ClearVue Partners taking the lead. This was an extension to a $200 million round announced in February that was led by CPE and Guotai Junan International.
The company’s other financial backers include Sequoia Capital China, SAIC Capital, China Growth Capital, GSR Ventures, and Lightspeed China Partners. It has also received support from strategic players such as Full Truck Alliance, China’s “Uber for trucks,” and local automotive parts supplier Wanxiang.
Plus plans to merge with Hennessy Capital Acquisition Corp V, which raised $345 million earlier this year. It is the latest in a string of SPACs launched by Hennessy Capital since 2013 with a general focus on industrial technology and infrastructure. Daniel Hennessy, the chairman and CEO, was previously a partner a US middle-market buyout player Code Hennessy & Simmons.
Public shareholders – which would appear to include the SPAC investors and the SPAC sponsor – will hold a 13% holding in the merged entity. Sponsors typically receive a 20% stake in the SPAC (not in the merged entity) for a nominal sum on completion of the listing. A further 5% will go to PIPE investors, including DE Shaw and BlackRock, which are participating in a $150 million placement.
The bulk of the equity – $2.7 billion – comes from existing investors in Plus which are rolling over their interests. They will have an 82% stake in the merged entity. Plus still has $371 million on its balance sheet from the most recent private funding rounds. The de-SPAC process will see a further $458 million added to the balance sheet, which means the enterprise value is $2.47 billion.
The transaction still needs to be approved by a majority of SPAC investors. On completion, they can exercise their warrants and purchase shares or redeem some or all their shares for cash.
Plus was established in 2016 and when China Growth Capital joined a seed round later the same year, the company was still searching for its application scenario. It eschewed the crowded robotaxi segment in favor of trucks because the path to commercialization is faster. Indeed, several Chinese robotaxi players have sought to expand into trucking.
Plus settled on cargo trucks as its core offering in 2018 and formed a joint venture with FAW, China’s largest truck maker, the following year. They will launch the country’s first mass-produced autonomous driving truck in June. The plan is to deliver 100-150 vehicles this year, several thousand in 2022, and several tens of thousands the year after that.
The company also collaborates with SF Express, launching a pilot with Plus last December that runs supervised autonomous trucks between Wuhan and Wuxi as well as Wuhan and Changsha. Meanwhile, SAIC connected the company with Netherlands-based OEM Iveco, one of its China joint venture partners. A new line of Iveco trucks will feature Plus’ automatic driving system.
If Europe is a market for the future, Plus already has operations in the US as well as China, albeit with different strategies. The mass-production model, FAW J7+, spearheads the company’s approach to China. It is capable of level-three (L3) autonomy, where drivers are still necessary but safety-critical functions are performed autonomously. In the US, Plus supplies software that carmakers install in their vehicles, but it is L4 technology.
“Just like Tesla, we use a complete set of L4 technology in a scenario where a driver is sitting in a car. Our algorithms can collect data and learn, which is an efficient way to move towards a totally driverless solution,” Wen Han, CFO of Plus, told AVCJ earlier this year.
Up to 6,800 trucks have been pre-ordered in China, while Plus was selected to provide 1,000 trucks to one of the largest private fleet operators in the US, according to a presentation. It has also started delivering the first batch of L4-enabled retrofit units. There are plans to reach full autonomy with L4 trucks by the end of 2024.
The company is expected to generate $3.5 billion in revenue by 2024, rising to $7.3 billion in 2025, with China accounting for more than 80% of that. The projected gross profit for 2025 is $1.8 billion, while EBITDA will hit $1.6 billion. In 2021, Plus is on course to deliver $16 million in revenue, $1 million in gross profit, and negative EBITDA of $52 million.
The market opportunity for autonomous long-haul trucking in the US and China is said to be $1.2 trillion.
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