Polestar's $20bn SPAC Merger with Gores Guggenheim

By Haozhe (James) Huang, Friedrich von Storch, Yujia Bao (IE Business School)


Overview of the deal

Acquirer: Gores Guggenheim

Target: Polestar

Total Transaction Size: $20 billion

Announcement Date: 27th September 2021

Expected Close Date: H1 2022

Acquirer Advisor: Deutsche Bank, Morgan Stanley, Guggenheim Securities, Barclays

Target Advisor: Citi

Swedish premium electric vehicle maker Polestar has announced to merge with a special purpose acquisition company, Gores Guggenheim. Upon closing of the proposed merger, the combined company will be named Polestar Automotive Holding UK Limited, which is expected to be listed on Nasdaq under the ticker symbol “PSNY”. The implied enterprise value of the combined company is roughly $20 billion. And current Polestar shareholders will retain 94% ownership after the transaction.

The merger will provide Polestar with $800 million in cash previously raised by the SPAC. Furthermore, top institutional investors have committed an additional $250 million PIPE investment to the combined business. All proceeds will be used to fund Polestar’s investment in new models and expansions into new markets. The SPAC merger will also add $10 billion to Volvo’s valuation, which is expected to raise $2.9 in an upcoming IPO.

With this merger, Polestar sets an ambitious goal of increasing its sales volume from 10,000 in 2020 to 290,000 annual EV sales in 2025. Additionally, Polestar aims to expand from the 14 markets it currently serves to 30 markets by 2023, as well as increasing the number of sales locations to at least 150 and the total number of service points to over 800.

“ In Alec and the Gores Guggenheim team, we have found a partner with an impressive track record of bringing leading companies to the public markets. The proposed business combination and listing position Polestar as a financially strong, future proof, global electric car company.” - Thomas Ingenlath, CEO (Polestar)

Company Details (Acquirer - Gores Guggenheim)

Gores Guggenheim is a special purpose acquisition company sponsored by an affiliate of The Gores Group, founded by Alec Gores, and by an affiliate of Guggenheim Capital. Gores Guggenheim completed its initial public offering in April 2021, raising approximately USD 800 million in cash proceeds to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

Founded in 2020, headquartered in Boulder, Colorado (USA)

CEO: Alec Gores

Market Cap: $1B (as of 10/10/2021)

Company Details (Target - Polestar)

Polestar is a Swedish automotive brand established in 1996 by Volvo Cars' partner Flash/Polestar Racing and acquired in 2015 by Volvo, which itself was acquired by the Chinese automotive company. Geely in 2010. In 2017, Polestar became an independent brand of premium electric performance cars founded by Volvo Cars and Geely.

Founded in 2017, headquartered in Gothenburg, Sweden

CEO: Thomas Ingenlath

EV: $2.0bn

Forecasted revenue: $1.6bn (2021E), $6.7bn (2023E)

Implied EV/Revenue: 12.5x (2021E), 3.0x (2023E)

Projections and Assumptions

Short-term consequences

The SPAC merger will shape Polestar into a more reputable and serious player in the electric vehicle space, and fuel its ambitious growth plan. The billion-dollar capital raised will insulate Polestar from pressures of rapidly growing cash needs: for the launch of Polestar 3, an SUV model to be assembled in South California as early as 2022, as well as two additional models in 2024. Post-transaction, existing Polestar shareholders will retain 94.1% ownership, while Gores Guggenheim shareholders and PIPE Investors will own 3.8% and 1.2% respectively. The remaining 0.9% stake in Polestar will be held by the SPAC sponsor Gores Guggenheim.

The listing will also be a major recognition of Geely’s transition to new energy cars, and long-term ambition to make premium cars. Geely now envisions Polestar a