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Qell Acquisition Corp’s $3.3bn Acquisition of Lilium

By James Muse, Omar Santos, Sean Salamante (Columbia University), Lolade Aluko, Jonathan Fuchs, Eden Yang (London School of Economics)

Photo: Eva Darron (Unsplash)


Overview of the deal

Acquirer: Qell Acquisition Corp. (NASDAQ: QELLU)

Target: Lilium

Total Transaction Size: $3.3 billion

Announce Date: 30 March 2021

Expected Close date: Q2 2021

Target Advisor: Citi

Acquirer Advisors: JP Morgan and Barclays

Led by the former president of General Motors North America, Barry Engle, special purpose acquisition company Qell Acquisition Corp. has agreed to a merger with eVTOL (electric airplane capable of vertical take-off and landing) company Lilium at a pro-forma enterprise value of $2.4 billion and an implied pro forma equity valuation of $3.3 billion. Lilium expects to receive $380 million in cash and $450 million through the PIPE investment, which raised capital from BlackRock, Tencent, LGT, Palantir, and PIMCO. The PIPE investment will be used to accelerate commercial launch operations, which consists of a production facility in Germany and getting type certification for their eVTOL jets. Lilium was established in 2015 by leaders in the aerospace industry from Airbus, Raytheon, MIT, and BAE Systems. Lilium is considered the leader in e-VTOL. The standard VTOL Jet market is dominated by Boeing and Lockheed Martin, and the jets are powered by gasoline-dependent rotors. Lilium’s proprietary design iterates upon the traditional jet engine through a single "stage" rotor system driven by an electric motor with zero emissions. Similar to EV, electric jet engines provide significant advantages in noise and dynamic efficiency. Many compare Lilium to a combination of Uber and Tesla since eVTOLs have the capability to operate as “flying taxis” however, the company’s main focus is on flights across states rather than within. Lilium’s flagship vehicle, the “7-Seater Jet”, has a projected cruise speed of 175 mph at 10,000 feet and a range of 155+ miles; all commercial operations are expected to fully launch in 2024. Barry Engle envisions Lilium as “the leader in regional electric air mobility”. The deal is expected to close in the second quarter of 2021 and trade on the Nasdaq Exchange under the ticker symbol “LILM”.

(Source: Lilium News Release)

“This is going to give us both a lot of expertise and operational knowledge from Barry and his team, but also the financing to achieve the type of certification and market entry with our airplane” - Lilium CEO Daniel Wiegand

(Source: CNBC)

Company Details: (Acquirer - Qell Acquisition Corp.)

Qell Acquisition Corp. is a special purpose acquisition company (SPAC) that was founded by Barry Engle (CEO) and Sam Gabbita (CFO) in 2020. Prior to founding Qell, Engle held several senior executive roles at General Motors Company including President of GM North America and Gabbita led the OGCI Climate Investments’ San Francisco office. Qell was founded to identify and partner with companies that are in their target markets of Next-Generation Mobility, Transportation, and Sustainable Industrial Technology, have enterprise values above $1 billion, and are technology-oriented.

(Source: Qell Acquisition Corp. Website)

Founded in 2020, headquartered in San Francisco, CA (USA)

CEO: Barry Engle

Number of employees: NA

Market Cap: $430M (as of 04/08/2021)

EV: $428M (as of 04/08/2021)

LTM Revenue: N/A


LTM EV/Revenue: N/A


(Source: FactSet)

Company Details: (Target - Lilium GmbH)

Lilium GmbH is a German aerospace company attempting to revolutionise personal regional mobility through the Lilium Jet. The Lilium Jet is a 100% electrical vertical take-off and landing vehicle (VTOL) that can carry up to 7 people. The company is planning to launch a commercial operation in 2024. Some of the main financiers of the company include the European Space Agency (ESA), Frank Thelen’s Freigeist Capital, and Tencent.

Founded in 2015, headquartered in Wessling, Bavaria (Germany)

CEO: Daniel Wiegand

Number of employees: 600

Market Cap: Not listed

LTM Revenue: N/A

Projections and Assumptions

Short-term consequences

On March 3, 2021, Bloomberg first reported that Qell and Lilium were in talks of a potential SPAC merger. Roughly a month later on March 30, Lilium officially announced that it would be merging with Qell Acquisition Corp. through a SPAC which is expected to close by the end of the second quarter of 2021 after about a month of speculation. SPAC’s have been growing in popularity in recent months as an alternative way for companies to go public but they have not seen much return. In fact, Qell’s shares are down 13% since Bloomberg first announced the potential of a merger between the two companies. However, both Qell’s and Lilium’s CEOs have voiced that they are not worried about short-term volatility in share performance as they believe this market will continue to grow over decades. As a result of the merger, the ticker QELLU is expected to become LILM and continue to trade on the Nasdaq.

In addition to the merger announcement, Lilium also revealed the development of their 7-Seater electric vertical take-off and landing jet (eVTOL) which they believe will allow them to become a global leader in the regional electric air industry. Lilium expects to use the funds gained towards the launch of commercial operations which is planned for 2024 which is when they expect to begin generating profits. As a pre-revenue startup, the investment carries the risk that if Lilium and Qell cannot deliver, the venture could result in a loss for both parties.

Long-term Upsides

Lilium plans to begin its regional air mobility offerings centred in Germany and Florida, beginning in 2024. As Lilium VTOLs (vertical take-off and landing aircraft) require a system of special ‘vertiports’ for their regional flights, this SPAC will likely help them forge additional partnerships to create the needed veriport infrastructure as it expands to new regions. Fourteen vertiports are planned in Florida and ten across Europe with the help of Ferrovial and Tavistock. This SPAC announcement comes just under six weeks after Joby Aviation’s $6.6B SPAC announcement, a competitor who does not have American airworthiness certification yet. As Lilium may gain up to $830 million from the SPAC, this will likely allow them to gain significant market share in Europe and the USA, and straighten out any engineering issues ahead of competitors. It can also aid with formulating a larger network of pilots, who are currently trained by Lufthansa.

People holding the QELLU stock seem optimistic about the share price rising significantly on long-term horizons. Typically, SPAC share prices fall due to dilution when the merger occurs. However, Lilium is arguably well-poised to create high levels of expected value. As the market is in its commercial infancy, and Lilium is already in the process of gaining both European and US certifications, it has significant growth prospects for those holding the SPAC shares. Overall, the liquidity benefits of the SPAC will help Lilium accelerate timelines for their planned 7-seater and 16-seater models, potentially bringing significant returns to shareholders by 2030.

Risks and Uncertainties

Technical challenges abound in this nascent industry of electric vertical take-off and landing (eVTOL) vehicles deserve a second look. For one, the Lilium Jet derives thrust from several small fans with significant power requirements. In the engineering space, experts have openly cast doubt about the aircraft’s design and projected range. Whether the Lilium Jets ultimately live up to their names is anybody’s guess, but what remains uncertain and risky is the future of Lilium’s operations. For one, the company’s plans for certification and production lie in the hands of the European Union Aviation Safety Agency (EASA) and the U.S. Federal Aviation Administration (FAA). According to Lilium’s press release, the Lilium Jet will be certified under SC VTOL and involves demonstrating less than one catastrophic failure in a billion flight hours.

Assuming everything goes as planned, the company expects to launch commercial operations in 2024 and achieve adjusted pre-tax profit by 2025. To do so, however, the company will certainly need more capital to support its workforce of over 600. With a pro forma equity valuation of $3.3 billion at a $10/share PIPE price, investors may take on a longer investment horizon to cash out on any real gains. Interesting developments to look out for include cost-cutting measures such as reducing headcount and the discovery of groundbreaking flight technology.



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