German aircraft startup Lilium has announced that it will float on the US stock market through a reverse merger undertaken with Qell Acquisition Corp, a special purpose acquisition company (SPAC), in a deal that will result in a business worth $3.3 billion. Lilium is among a number of aviation companies that are looking to deploy electrically powered planes and take advantage of advances in battery powered technology. Lilium, who have built and tested a five-seater prototype aircraft, aim to compete in the short-haul flight market with a plane that can take off and land vertically and that has achieved speeds of over 100km/h in test flights. The company aims to market its plane to travelers wanting to beat traffic and those making short flights between cities.

Who is Involved with Qell Acquisition

The Qell acquisition company is led by Barry Engle, a former president of General Motors, who has stated that the deal to float Lilium will help achieve the goal of commencing commercial operations by 2024. Daniel Wiegand, the CEO and co-founder of Lilium, has said that Qell is a partner that brings tremendous experience in the mobility business and shares the company's sustainable travel philosophy.

How big is the Reverse Merger?

The total proceeds of the deal are expected to be about $830 million made up of $380 million held in trust and a $450 million private placement. The private placement investors include the fund manager Baillie Gifford as well as investment funds managed by Tencent, Blackrock, Ferrovial, Palantir, Atomico, LGT, FII Institute among other private funds. The transaction implies a value of $2.4 billion for the enterprise which is calculated by multiplying 70% of forecast revenue of $3.3 billion with a forecast of core profits at 3.4 times of $708 million by 2026.

Seven Seat Jet Model

As well as the five seat prototype the company has tested they have also created a seven seat model that they consider will be the most economically viable for regional flights which they expect will be the majority of their business and will be the first to go into mass production. The European Union Aviation Safety Agency, the EU regulator for aircraft, has approved the plane for flight through the grant of an CRI-A01 certification; the next goal is to obtain the equivalent certification from the US regulator.

Reverse Mergers in Transportation

When the merger is complete, the new entity will add Barry Engle to the board who will join existing members that includes Tom Enders who was a former CEO of Airbus. Advisory services for the merger were provided to Qell by Barclays and JP Morgan while Lilium was advised by Citi. Reverse mergers have become increasingly popular in recent times since they avoid the compliance burden of going through a traditional IPO process and allow a private company to go public without having to raise capital. There have been multiple SPAC deals recently in the transportation area for electric cars and autonomous vehicles.

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