nuTonomy exclusively targeted strategics for capital, sale, source says
MergerMarket
Had mulled USD 60m capital raise
Pre-revenue status complicated deal talks
nuTonomy, a driverless car technology company, spoke to strategics about potential financing while simultaneously considering a sale, said a source close to the situation.
Delphi Automotive [NYSE:DLPH] announced plans Tuesday to acquire nuTonomy for reportedly USD 400m upfront. Morgan Stanley and law firm Gunderson Dettmer advised nuTonomy on the sale, the source said.
GCA Advisors and Goldman Sachs advised Delphi, the Gillingham, UK-based auto parts manufacturer. Fenwick & West served as legal counsel, the source said.
Morgan Stanley was hired a year or so ago by the company, said the source.
In the summer of 2016, nuTonomy launched its driverless taxi testing program in Singapore. nuTonomy had been seeking USD 60m to gain two additional years of runway on the program, which is still undergoing trials, the source added. Though nuTonomy was not aggressively marketed as a sale target, the company was willing to talk to investors that wanted to get involved at a higher level than providing capital, the source explained.
In June 2016, nuTonomy’s CEO Karl Iagnemma told this news service that the company, which had then raised USD 19.6m in capital, was considering a new round and had talked to many types of potential investors, declining to elaborate on a specific timeline for either the round or an exit. Iagnemma did not return calls for comment for this story.
A spokesperson for Delphi declined to comment on the deal background, but said that both Delphi and nuTonomy are heavily involved in Automated Mobility on-Demand (AMoD) services in Singapore. News reports on the sale indicated that the companies expect to complete the Singapore program by 2019.
nuTonomy has also recently begun testing cars in the Boston area, while Delphi was approved to start a similar program in Massachusetts earlier this year, the spokesperson said. The deal will speed up both companies’ ability to commercialize AMoD, he said.
nuTonomy was pitched exclusively to strategics since they would be able to offer higher valuations than investors, the source said. International and domestic players in both the automotive and technology spheres took a look at the business, with serious talks beginning in the summer of 2017. Prior to Delphi’s signing a few days ago, nuTonomy was considering an alternative investment—not an acquisition, the source said, declining to provide specifics.
Every party involved, the source said, had a different idea for how to invest in nuTonomy, with some wanting to acquire the business and others wanting to put in money and then strike up commercial partnerships, the source said. “That’s why it took so long,” the source added.
The deal was also atypical because the valuation for the company, which is pre-revenue, was not based off projected earnings. “It was just the number they wanted,” said the source.
Delphi emerged as the winning suitor because its automatic vehicle strategy is very complementary to nuTonomy’s, and because it can provide better access to resources and speed up development plans, said the source. According to a press release, Delphi is adding 70 of nuTonomy’s engineers and scientists to its existing team of more than 100.
The deal is slated to close by the end of the year and no antitrust complications, nor any divestitures, are expected, said the source.
Previous investors in nuTonomy, founded in 2013 by Iagnemma and CTO Emilio Frazzoli, included Ford Motor’s [NYSE:F] venture capital arm Fontinalis Partners, Highland Capital Partners, Signal Ventures, Samsung Ventures and the investment arm of the Singapore Economic Development Board.
In the 2016 story, Iagnemma told this news service that the company would be interested in launching driverless car programs in China, the UK and certain US markets following the completion of its Singapore plan. He mentioned that Jaguar was testing nuTonomy’s technology in the UK.