Walmart Inc. of Bentonville on Tuesday announced an agreement to purchase 4,500 electric vehicles from Canoo Inc. to be used for final mile deliveries.
The five-year agreement gives Walmart (NYSE: WMT) the option to purchase up to 10,000 vehicles from Canoo, which is moving its headquarters and a production facility to Bentonville. Purchases will begin with Canoo's Lifestyle Delivery Vehicle, an SUV-like model similar to what NASA has agreed to purchase from the company to transport astronauts to the launchpad.
The deal's total value was not included in a news release. According to Canoo's website, the non-commercial version of the vehicle starts at $34,750. At that price, the deal with Walmart for 4,500 vehicles would be worth more than $156.4 million.
According to the 8-K form Canoo filed with the Securities & Exchange Commission on Tuesday, the vehicles will be sold for an agreed upon price per model and that price will be guaranteed for the first 10,000 vehicles Walmart purchases. The price will be in the EV Fleet Purchase Agreement, and the full text of it will be filed as an exhibit to Canoo's next quarterly report.
The agreement also prohibits the EV company from doing business with Amazon, its subsidiaries or affiliates while its agreement with Walmart is in effect. Amazon has a similar deal with EV maker Rivian Automotive Inc., Bloomberg reports.
In addition, Canoo agreed to give Walmart written notice within 72 hours of an acquisition proposal or an authorization by its board to initiate or pursue an acquisition proposal, and provide the name of the buyer if that buyer is one of Walmart’s competitors.
Canoo and Walmart have entered into a Warrant Issuance Agreement, too, that could result in the retail giant owning more than 20% of Canoo. Walmart could buy up to 61.16 million shares over 10 years at $2.15 per share and and vest it immediately with 15.29 million shares, the filing reads. The remaining shares vest quarterly and in proportion to net revenue generated by vehicle purchases and any other sale of products or services involving the two companies, up to $300 million, at which point all shares will have vested.
Stockholders will vote on the issuance of the warrant no later than Canoo's 2023 annual meeting.
Walmart said the initial vehicles it is purchasing from Canoo, which have 120 cubic feet cargo volume, will be used to deliver online orders in support of its growing e-commerce business. The vehicles could also be used for GoLocal, the retailer's delivery-as-a-service business.
The companies plan to begin deliveries in the Dallas-Fort Worth area in the coming weeks, ahead of the vehicle's official debut in 2023.
"Walmart's massive store footprint provides a strategic advantage in today's growing 'Need it now' mindset and an unmatched opportunity for growing EV demand, especially at today's gas prices," Canoo CEO Tony Aquila said in a news release.
The partnership between the two publicly traded companies will contribute to Walmart's goal of achieving zero-emissions by 2040.
David Guggina, Walmart's senior vice president of innovation and automation in the U.S., said the deal with its Bentonville neighbor allows the company to "collaborate and innovate in real-time, as well as the opportunity to aid in the creation of manufacturing and technology jobs here in our home state of Arkansas."
Walmart announced in January that it was purchasing 5,000 electric vehicles from BrightDrop, a division of General Motors, as part of a plan to expand its InHome delivery service. The retailer can currently reach 80% of the U.S. population with same-day delivery through its final mile delivery network, which includes autonomous vehicles and drone delivery in some areas.
Shares of Canoo (Nasdaq: GOEV) were up more than 75% midday Tuesday.
The deal with Walmart comes after the electric vehicle company reported widening losses and dwindling cash in the first quarter of 2022. The company ended the period with just $104.9 million in unrestricted cash and cash equivalents, raising doubts about its future.
Canoo said at the time that it had more than $600 million in accessible capital.
The company reported in May that it had reached 17,500 vehicle pre-orders with a projected value of $750 million.