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The outside of the climate controlled manufacturing room at the new Exro Technologies manufacturing plant in Calgary on March 2, 2023.Todd Korol/The Globe and Mail

Exro Technologies Inc. is buying California-based SEA Electric in a $332-million deal it says will expand its performance-boosting offerings to electric-vehicle makers amid a market that’s turned negative on the industry’s prospects.

Exro EXRO-T, whose technology improves the efficiency and power of electric motors for cars, trucks and motorcycles, said on Tuesday the acquisition will boost its revenues and allow it to become profitable within 12 months.

The company recently started up a new manufacturing facility at its home base of Calgary and has been testing its Coil Driver units with a number of auto-parts suppliers and EV makers, including SEA Electric.

Sue Ozdemir, Exro’s chief executive officer, said the two companies’ products are complementary, and the deal will allow the combined entity to offer an integrated set of products to broaden its appeal to customers. It will also bring Exro a sizable order book for SEA’s system and cost savings afforded a larger entity.

“We do go to the same customer base. We purchase from the same supply chain base. We both purchase motors; we both purchase batteries; we both purchase software, chips and other pieces,” Ms. Ozdemir said in an interview. “Now we can kind of consolidate and get some cost reductions between people, buildings and supply chains, and put out more revenue with less [cash] burned.”

Exro’s Coil Driver is a technological twist on the inverter, acting like a combination gearbox and turbocharger for EVs. The unit is added to an electric motor, increasing torque at low speeds and power and efficiency at high speeds. The performance boost allows a vehicle to have a smaller motor, or fewer motors, as some EVs have as many as four.

SEA Electric’s product is called SEA-Drive, which is a propulsion technology that controls all of the components that electrify a vehicle. Its products have been deployed in the United States, Canada, Australia, New Zealand, Thailand, Indonesia, India and South Africa. Mack Trucks and Hino Motors are among manufacturers that have signed multiyear commitments to install the technology.

Exro has hit a number of the milestones it had set last year for moving toward commercial operations, Ms. Ozdemir told shareholders earlier this month. The company began deliveries for a number of customers, including Vicinity Motor Corp., HB4 S.r.l., Giaffone Electric and MegaFlux/Potencia.

It successfully track- and road-tested matching its technology with SEA’s power system on a UPS-style delivery truck. It has advanced a partnership with Guelph, Ont.-based Linamar Corp. to develop an E-axle system for commercial trucks and is on track to secure orders for the technology this year, Ms. Ozdemir said. The company plans to manufacture Coil Driver units at its own facility as well as license the technology to other players.

But Exro stock has been hit hard as the outlook for EVs has become murky over the past several months, with major manufacturers, including Ford Motor Co. and General Motors Co., tempering sales expectations amid concerns about demand and costs, suggesting the transition to electrified transport will be a longer process than previously thought.

Exro shares are down 63 per cent in the past 12 months. They fell 9 per cent on the Toronto Stock Exchange on Tuesday, closing at $1.01.

Ms. Ozdemir said the negative sentiment was a consideration behind the decision by Exro to proceed with the deal to acquire SEA.

The market could remain below previous expectations for the next 24 to 26 months, which shows the importance of generating revenues, she said. However, electrification will remain a focus of major manufacturers over the long term, and so overall Exro’s strategy hasn’t changed.

Under the deal, Exro will issue 153.8 million of its common shares and 168.7 million convertible shares to SEA stockholders. Based on a weighted average Exro trading price, that implies a value of about $1.03 a share, or a total of $332-million. Exro will also assume about $62-million of SEA debt.

The company said it is also raising $30-million by issuing subscription receipts, as well as $12-million in debt from an Canadian pension fund.

Exro said the combined company is aiming for delivery of more than 1,000 propulsion systems to truck manufacturers in 2024, generating revenues of more than $200-million.

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