Sarcos Robotics To Go Public in $1.3 Billion SPAC Deal

Industrial robot specialist Sarcos Robotics has agreed to merge with special purpose acquisition company (SPAC) Rotor Acquisition (NYSE: ROT) to take the company public in a deal that gives Sarcos an enterprise value of $1.3 billion. Rotor is the SPAC set up by former Credit Suisse Group (NYSE: CS) exec Brian Finn.

Here’s what investors need to know about Sarcos Robotics.

How Sarcos Stands Out From Recent Robotics IPOs

Sarcos has actually been around for decades, since it was originally founded in the early 80s. The company spent a few years as a subsidiary of aerospace juggernaut Raytheon (NYSE: RTX) before it spun out on its own as a private company backed by other large companies like Caterpillar (NYSE: CAT), Microsoft (NASDAQ: MSFT), and Schlumberger (NYSE: SLB), among others.

Nowadays, the company develops a Guardian line of dexterous robotic systems, some of which are essentially exoskeletons that humans can use in industrial applications for greater flexibility and safety. Sarcos uses a subscription model as part of its Robot-as-a-Service (RaaS) framework, generating recurring leasing revenue while handling things like maintenance and support for a monthly fee.

Instead of replacing humans with robots, Sarcos seeks to augment human productivity in tasks that cannot be easily automated. The company targets a wide range of industries, including automotive manufacturing, oil and gas construction, utility infrastructure inspection, and aerospace maintenance.

Deliveries of the Guardian XO and Guardian XT have not yet begun, and Sarcos continues to make progress through its development pipeline. The company is working on early testing and prototypes, with its contract manufacturer scheduled to commence production in the fourth quarter. By the second quarter of 2022, Sarcos hopes to be in low-rate initial production, with commercial revenues taking off from there.

Current revenue is fairly modest at $8 million in 2020, but Sarcos estimates that its total addressable market is massive: $147 billion in the United States alone. Sales are expected to be $9 million in 2021, before ramping up to $2.7 billion in 2026, according to the company’s ambitious forecasts.

The Details on the Sarcos and Rotor Acquisition (ROT) Merger

Rotor currently has $276 million in cash in its trust account, and the SPAC has lined up an additional $220 million in PIPE (private investment in public equity) financing. Prominent institutional investors participating in the PIPE include Palantir Technologies (NYSE: PLTR) and BlackRock (NYSE: BLK), as well as existing investors Caterpillar and Schlumberger.

Of those cash proceeds, $265 million will be allocated towards capital uses such as ongoing product development and other capital expenditures. Another $50 million will be used on transaction expenses, with the remaining $181 million in cash going to the combined company’s balance sheet. All told, Sarcos will have an enterprise value of $1.3 billion.

Rotor’s public shareholders will end up owning 15.7% of the new company, assuming no redemptions, with existing Sarcos shareholders having a 68.2% stake. PIPE investors will get a 12.5% stake and the SPAC sponsor will have 3.6% of the company.

The deal is expected to close in the third quarter, at which point the ticker symbol will change to “STRC.”

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