Ouster and Velodyne, two lidar firms, have agreed to a merger in an all-stock transaction, the businesses stated Monday. Both Ouster and Velodyne will keep a 50% stake within the new firm, in accordance with the settlement that was signed on November 4.
The merger comes as many within the business, together with autonomous automobile know-how firm Cruise’s CEO Kyle Vogt, have been anticipating one other spherical of consolidation within the lidar house. That’s partially as a result of there are too many lidar firms for what number of OEMs are implementing the sensor for autonomous driving purposes. It’s additionally as a result of many of those firms, together with Ouster and Velodyne, went public by way of particular objective acquisition (SPAC) at doubtlessly inflated valuations that had been primarily based on projected income, not precise income.
Earlier this yr, Velodyne acquired AI and lidar firm Bluecity.ai, and final yr, Ouster acquired lidar startup Sense Photonics. AV firm Aurora purchased out Blackmore in 2019, and Cruise acquired Strobe in 2017.
Both Velodyne and Ouster have been combating plummeting inventory costs over the previous yr, and neither has been in a position to flip a revenue but. The firms closed out the second quarter with a web lack of $44.3 million and $28 million, respectively. Loss-generating firms can typically keep investor religion in the event that they no less than generate common will increase in income, which Ouster has finished year-over-year. But Velodyne’s income doesn’t appear to have grown in any respect prior to now yr; moderately it fell 41%.
By merging, the businesses hope to mix forces and create scale “to drive profitable and sustainable revenue growth,” in accordance with Velodyne’s CEO Ted Tewksbury.
The firms say that the merger will enable them to understand annualized price financial savings of no less than $75 million inside the 9 months after the transaction closes, in addition to $335 million in mixed money for the third quarter.
The merger might also be a lifeline for Velodyne, an organization that has been struggling over the previous yr with a sequence of inner dramas, together with the resignation of its CEO Anand Gopalan final July. (Tewskbury took over for him in November.) Velodyne by no means stated why Gopalan resigned, however his leaving price Velodyne $8 million in fairness compensation, in accordance with 2021’s second quarter earnings report.
Prior to that, Velodyne’s founder David Hall was eliminated as chairman of the board and his spouse, Marta Thoma Hall, misplaced her function as chief advertising and marketing officer following an investigation by the board into the 2 for “inappropriate behavior.” The authorized charges for the dramas price Velodyne $3.7 million within the first half of 2021. In May final yr, Hall wrote a letter blaming the SPAC with which Velodyne merged, Graf Industrial Corp., for the corporate’s poor monetary efficiency.
A brand new path forward
The mixed firm’s board of administrators will include eight members, 4 from Ouster’s board and 4 from Velodyne’s. Angus Pacala, present co-founder and CEO of Ouster, will probably be CEO of the brand new firm. Tewksbury will act as govt chairman of the board.
In an announcement, Ouster stated the merger would enhance operational efficiencies, more than likely by eliminating redundancies. That normally means layoffs will observe, however the firms didn’t reply in time to Thealike’s request for remark.
With a mixed industrial footprint and distribution community, the brand new firm expects to ship greater volumes of product at diminished prices, Ouster stated.
The merger, which is able to see Velodyne’s share exchanged for 0.8204 shares of Ouster at closing, is anticipated to be accomplished within the first half of 2023, pending shareholder approval by each firms. Ouster and Velodyne will proceed to function their companies independently till the transaction is full.
