Dragonfly Energy, a Lithium-Ion battery manufacturer, has entered into a definitive agreement for a business combination with Chardan NexTech Acquisition 2 Corp (CNTQ), a special purpose acquisition company, resulting in Dragonfly becoming a publicly-traded company on the NASDAQ.
Upon closing the transaction, the combined company is expected to be listed on the NASDAQ under the new ticker symbol “DFLI.”
The business combination values Dragonfly at $500 million pro forma enterprise value.
The company plans to use the proceeds to accelerate the market penetration of its existing business and commercialize its proprietary and patented All-Solid-State-Battery technology.
Estimated cash proceeds to the combined company are expected to consist of CNTQ’s approximately $128 million of cash in trust and an additional $230 million consisting of a $75 million senior secured term loan (used in part to refinance approximately $45 million of outstanding Dragonfly indebtedness), a $5 million equity investment at $10.00 per share from CNTQ’s Sponsor, Chardan NexTech Investments 2, and a $150 million Chardan Equity Facility (ChEFTM) from Chardan, an affiliate of CNTQ’s sponsor.
The transaction includes an earn-out provision for up to an additional 40 million shares as follows: 15 million issued if both 2023 audited Revenue and Operating Income reach $250 million and $35 million, respectively; 12.5 million issued at a price target of $22.50 by December 31, 2026; 12.5 million issued at a price target of $32.50 by December 31, 2028.
All Dragonfly stockholders will roll 100% of their equity holdings into the new combined company.
Stifel, Nicolaus & Company, Incorporated is serving as a financial advisor. O’Melveny & Myers, and Parsons Beble & Latimer serve as legal counsel to Dragonfly.
Chardan is serving as a financial advisor, Stifel and Chardan are acting as joint placement agents, Skadden, Arps, Slate, Meagher & Flom, and Brownstein Hyatt Farber Schreck are serving as legal counsel to CNTQ. Energy Impact Partners is serving as the lead arranger of the senior secured term loan. Chapman and Cutler are serving as legal counsel to Energy Impact Partners.
Three battery storage companies went public in Q1 2022, according to Mercom’s Q1 2022 Funding and M&A Report for Storage, Grid, and Efficiency; two merged with SPACs, and one went public through the traditional IPO route.
Also, according to the report, total corporate funding (including VC, Debt, and Public Market Financing) in Battery Energy Storage came to $12.9 billion in 26 deals compared to $4 billion in 27 deals in Q4 2021. Funding significantly increased YoY compared to $4.7 billion in 18 deals in Q1 2021.