Aquaron Acquisition Corp. (NASDAQ:AQU) has entered into a definitive agreement to combine with hydrogen energy company Bestpath at an initial equity value of $1.2 billion.

Shanghai-based Bestpath has developed technology for hydrogen fuel cell-powered heavy trucks and the refilling stations that would supply them.

The combined company is expected to trade on the Nasdaq once the deal is completed in late 2023.

Transaction Overview

Aquaron has about $55 million in its current trust and it has not yet supplemented this with additional committed financing, but its 8-K notes that the SPAC will make “commercially reasonable efforts” to raise a PIPE of unspecified size.

The SPAC must maintain more than $5 million in cash available in order for the deal to close and the transaction may be terminated if not closed by January 6, 2024.

Bestpath shareholders stand to earn up to 15,000,000 additional shares through an earnout that will be dispersed in even halves if it hits a pair of revenue targets. One half will be distributed if Bestpath achieves RMB 60 million ($8.7 million) in revenue in its fiscal year ending September 30, 2023 and the other half if it notches RMB 100 million ($14.5 million) in its 2024 fiscal year.

Company shareholders are subject to a six-month lock-up but half of their holdings are to be released early if the combined company trades at or above $12.50 for 20 of 30 trading days.

The parties have not yet released an investor presentation but Aquaron’s profile page will be updated once new details are made available.

Quick Takes: Bestpath joins a growing family of Chinese automotive SPAC deals, and one of those – NWTN (NASDAQ:NWTN) – currently leads all EV de-SPACs in share price having closed Friday at $10.29.

But, Bestpath has closer ties to Jupiter Wellness’ (NASDAQ:JWAC) combination target Chijet Motor Company. Chijet has had the unusual journey of announcing a combination with one biotech SPAC, Deep Medicine (NASDAQ:DMAQ), only to have that one terminated and a combination with a different biotech SPAC announced 30 days later.

Aquaron, for its part, was always searching for an energy or EV company based in China as a part of its investment criteria. Where it crosses paths with Chijet is that Chijet owns 60% of automaker FAW Jilin and this is the source of much of its business activity and manufacturing base.

Bestpath, meanwhile, has been collaborating with FAW Jiefang (SHE:000800), a sister subsidiary to FAW Jilin under the larger FAW Group. Together with the Refire Group, Bestpath and FAW Jiefang have developed heavy duty trucks powered by hydrogen fuel cells.

This project is one of the scant news mentions of Bestpath in English on the web – the company’s own website is Chinese only. Nonetheless, it describes this collaboration as one in which FAW Jiefang makes the trucks, Refire makes the engines and Bestpath will serve as the “vehicle operator” managing the logistics chain for the trucks.

Bestpath received the first 100 hydrogen trucks in August as a part of the partners’ initial phase involving a total of 350 trucks that will be serving retail clients Ikea, JD.com (NASDAQ:JD), SF Express, and SECO.

Overall, Bestpath describes itself as focusing on “on the entire lifecycle of hydrogen energy applications” while being committed “to promoting the commercialization of various types of hydrogen fuel cell powered vehicles in multiple scenarios”.

While expansive, this description is light on detail but it does appear that “promotion” is a large part of Bestpath’s job description, at least as far as the arrangement with FAW Jiefang and Refire goes. The company also owns its own carmaking subsidiary called Huture Motors, which has a manufacturing facility for R&D.

But, Bestpath’s materials stop short of specifying which portions of it’s the hydrogen vehicle designs and refilling stations it makes in-house. Nonetheless, the company notes that this transaction is largely aimed at expanding this facility and its capacity.

The scale of Bestpath’s earnout targets suggest that Bestpath is still at the research stage for much of its work, however. Treated purely as projections, $8.7 million in revenue for 2023 and $14.5 million in 2024 would make Bestpath a very early-stage company given its $1.2 billion unicorn valuation in this transaction. That calculates to a multiple of 138x its 2023 revenue goal and 82.7x its 2024 one.

Assuming the company maintains its share price through these milestones, investors may raise an eyebrow at the company rewarding itself with $75 million in stock for achieving revenue in the single-digit millions this year and another $75 million next year for crossing into the teens.

Then again, NWTN shares are still riding high on the back of news that the company delivered its first 20 EVs to a Dubai-based client in December, so there is still enthusiasm for the sector.

ADVISORS

• Paul Hastings LLP, Zhonglun Law Firm and Ogier are serving as legal counsel to Bestpath.
• Wilson Sonsini Goodrich & Rosati, P.C. and Jingtian & Gongcheng are serving as legal counsel to Aquaron.