Velodyne Lidar and Graf Industrial Corp. Announce Business Combination to Form Leading Publicly-Traded Lidar Technology Company

- Velodyne, the world's leading lidar technology company, to combine with Graf Industrial Corp.

HOUSTON, July 2, 2020 — (PRNewswire) —  Graf Industrial Corp. ("GRAF") (NYSE: GRAF, GRAF.U, GRAF WS), a special purpose acquisition company founded by James Graf and Michael Dee, announced today that it has entered into a definitive agreement with Velodyne Lidar, Inc. ("Velodyne" or the "Company") and its founder David Hall, pursuant to which GRAF will combine with Velodyne through a merger of a wholly-owned subsidiary of GRAF with and into Velodyne, with Velodyne surviving as a wholly-owned subsidiary of GRAF. Current Velodyne shareholders, including David Hall and strategic investors Ford, Baidu, Inc., Nikon Corporation and Hyundai Mobis, will retain an equity interest of more than 80% in the combined company. Upon the closing of the transaction, GRAF will be renamed "Velodyne Lidar, Inc." and will remain NYSE-listed under the new ticker symbol VLDR. 

About Velodyne

Velodyne is the pioneer developer of lidar technology and continues to be a market leader, making the technology widely available and affordable for corporate and consumer markets. Velodyne's founder and industry icon, David Hall, invented real-time surround view lidar systems in 2005. Mr. Hall's invention revolutionized perception for autonomy and advanced driver assistance systems ("ADAS") in automotive, plus new mobility, mapping, robotics and security applications.

Velodyne is headquartered in San Jose, CA. The Company began developing the lidar technology in 2005 as part of Velodyne Acoustics, founded by David Hall in 1983. In 2015, Velodyne became independent from Velodyne Acoustics and focused on the development of lidar technology. Today, Velodyne offers a high-performance product line with a broad range of sensing solutions, including the cost-effective Puck™, the versatile Ultra Puck™, the autonomy-advancing Alpha Prime™, the ADAS-optimized Velarray™ and the software for driver assistance, Vella™. Unparalleled leadership in lidar technology ensures Velodyne's ongoing prominence in the development of ADAS, autonomous vehicles, safer mobility and last-mile delivery solutions.

Velodyne has added to its portfolio the groundbreaking Vella software which will enable multiple new markets and applications. Vella software combined with lidar from the Vela family will provide a higher degree of accuracy and safety to vehicle systems that incrementally address SAE's Levels of Driving Automation 1-5, to avoid collisions, avoid pedestrians and make roadways safer. Vella software will additionally be sold for applications in new markets which require precise perception such as those for security, robotic delivery and smart city.

As a market leader, Velodyne has served more than 300 customers including nearly all of the leading global automotive original equipment manufacturers ("OEMs"). It has booked over $500 million in revenues since its inception. Estimated revenues under existing customer contracts are expected to exceed $800 million from 2020 to 2024. Velodyne is expected to generate revenues of approximately $100 million in 2020, increasing to approximately $680 million in 2024 with existing contracts expected to drive just under 50% of the estimated 2024 revenues. EBITDA and free cash flow are expected to be positive in 2022.

As a first-mover, Velodyne has been able to establish several defendable moats around its business, including customer entrenchment, an extensive patent portfolio, a broad product offering and commercial scale manufacturing capabilities. Proprietary manufacturing innovations and manufacturing partnerships with Nikon Corporation, Fabrinet and Veoneer, Inc. continue to lower the cost of production and allow for the development of new lower cost products, enable mass market adoption and a significantly expanded total addressable market ("TAM"), while maintaining robust margins. Strong customer relationships established over time and ownership of protected technology provide clear differentiation in the market. Following the transaction, Velodyne will have significantly greater financial flexibility to execute on its strategic growth initiatives, as well as leverage its proven operating platform. 

David Hall, founder and executive chairman of Velodyne, said, "Lidar technology is mandatory for machines to perceive the world and make safe decisions. Velodyne has the key technology that is enabling the age of autonomous machines."

Dr. Anand Gopalan, CEO of Velodyne, said, "Partnering with Graf Industrial will provide the opportunity to enhance our leading position in the lidar and sensor markets broadly around the world, creating new and exciting opportunities for our customers and employees. We will continue to focus on executing our strategic plan to deliver strong and disciplined growth, while realizing attractive returns through prudent capital management." 

James Graf, CEO of GRAF, said, "We are tremendously excited by the opportunity to partner with David Hall and Velodyne. The leadership team, led by Dr. Anand Gopalan and Drew Hamer, has done an outstanding job in preparing the Company for the inflection point of lidar and becoming a public company. We're especially excited by Velodyne's potential to greatly improve vehicle safety by augmenting ADAS systems and help leading e-commerce companies and others realize autonomous last-mile delivery."

Michael Dee, president and CFO of GRAF, said,  "There is no reason we won't see -- and insurance companies won't demand -- a lidar system in every vehicle for safety, now that Velodyne has been able to drive the costs down through relentless manufacturing process improvements. We also believe the Company's differentiated and scalable operating platform make the economics of selective consolidation hugely compelling."

Key Transaction Terms 

Pursuant to the business combination, GRAF will acquire Velodyne through a reverse merger in which Velodyne is ascribed an enterprise value of approximately $1.6 billion and equity value of approximately $1.8 billion. The transaction will be funded by: (i) issuance of approximately $1.5 billion in new common stock of GRAF to current holders of Velodyne securities ("Velodyne Holders") (rollover equity); (ii) cash from the GRAF trust account (up to approximately $117 million); and (iii) cash from a $150 million PIPE at $10.00 per share from a broad group of new institutional investors, as well as certain of GRAF's existing shareholders. Following the transaction and after payment of transaction expenses, Velodyne is expected to add approximately $190 million of cash to its balance sheet and up to $50 million of total cash consideration will be paid to existing Velodyne shareholders.

Assuming no redemptions of GRAF public shares, Velodyne's existing shareholders will hold approximately 83% of the issued and outstanding shares of common stock immediately following the closing of the business combination. The GRAF Founder Group will retain 2,300,000 founder shares at closing. In the event the closing price of the common stock of the combined company on the NYSE is at least $15.00 for 20 days of any 30-day period from the date hereof through the date that is six months after the closing of the merger, two million additional shares of the combined company's stock will be issued to Velodyne holders as incremental transaction consideration and the GRAF Sponsor will retain an incremental 275,000 shares. The GRAF Sponsor will forfeit all of its approximately 14.2 million private placement warrants for no consideration at closing.  

The transaction has been approved by the boards of directors of GRAF and Velodyne, and is expected to close in the third calendar quarter of 2020. Closing is subject to approval by GRAF and Velodyne stockholders and the condition that at closing there is at least $200 million in cash available from the PIPE and GRAF's trust account, of which at least $50 million is cash remaining in GRAF's trust account. GRAF shareholders must also extend GRAF's deadline to complete a business combination before July 31, 2020, a preliminary proxy for which was filed with the SEC by GRAF on June 26, 2020. A copy of the merger agreement will be filed as an exhibit to a current report on Form 8-K to be filed by GRAF with the United States Securities and Exchange Commission ("SEC") in connection with the proposed transaction.

BofA Securities is acting as exclusive financial advisor to Velodyne. Oppenheimer & Co. Inc. is acting as financial advisor and PIPE private placement agent to GRAF. Oppenheimer & Co. Inc. and EarlyBirdCapital, Inc. are acting as capital markets advisors to GRAF. Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP is acting as legal advisor to Velodyne, and White & Case LLP is acting as legal advisor to GRAF.

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