ESS Tech Shareholders to Own 5-10% of Combined Firm in Proposed $515M Merger, CEO Says

Shareholders of ESS Tech Inc. (NYSE:GWH) are expected to own between 5% and 10% of a new combined entity under the terms of a proposed merger, CEO Drew Buckley told Investing.com. The non-binding letter of intent with an unnamed private energy firm implies a combined enterprise value of approximately $515 million.

Deal Structure and Valuation

In an interview, Buckley provided key details on the potential business combination first announced in early August, clarifying the prospective ownership split and the nature of the valuation premium for ESS shareholders.

• Ownership Stake: Based on the current structure under consideration, existing ESS stockholders would hold approximately 5% to 10% of the combined company at closing, subject to final valuations.
• Valuation Premium: The previously mentioned premium for ESS will apply to the company's “fully diluted market capitalization at the time the definitive agreement is signed,” rather than being tied to a specific share price.

The CEO stressed that the terms are not yet finalized. "The LOI is non-binding, and the final transaction terms, including the valuation, exchange ratio and resulting ownership, will be established in the definitive agreements," Buckley stated.

Strategic Rationale

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The proposed merger aims to pair ESS's energy storage technology with a partner possessing a proven commercial track record. Buckley described the target company as having an "established operating platform" and a history of "revenue-generating commercial execution," which he said is complementary to ESS's business.

This move comes as ESS navigates a challenging period. The company reported second-quarter revenue of just $73,000, a steep decline from $2.4 million in the prior-year period. The strategic goal, Buckley explained, is to "bring together technology and commercial execution to create greater scale and speed to market."

Timeline and Uncertainties

ESS is targeting a definitive agreement by the end of September, with a goal to close the transaction before the end of the year. The deal remains subject to due diligence, negotiation of final terms, and approvals from boards, stockholders, and regulators.

Several key structural details remain under evaluation, including which company will be the surviving entity and whether the current stock listing and ticker will be retained. Buckley declined to speculate on the final mechanics of the transaction before a definitive agreement is reached.