Lion Electric Co.'s lithium-ion battery manufacturing facility in Mirabel, Que. on Sept. 14, 2023.Christinne Muschi/The Canadian Press
A group of Quebec investors is poised to take control of Lion Electric Co. LEV-T and pull it out of bankruptcy protection, giving the electric school bus maker a new lease on life just as it appeared to be speeding toward liquidation.
The Saint-Jérôme, Que.-based manufacturer said in a statement Thursday evening that it entered into a definitive agreement on a sale and recapitalization with a consortium of investors that includes Pierre Wilkie, a serial entrepreneur who has twice sat on Lion’s board. Montreal real estate magnate Vincent Chiara is also part of the group.
No financial details were immediately disclosed. The offer was submitted to the Superior Court of Quebec, which will consider the matter at a hearing scheduled for next Wednesday.
Lion went public in 2021 with a roar and a bet that it could transform the transportation industry with innovative designs for zero-emission buses. But it eventually found itself unable to pay debts and scrambled to find fresh cash to fund its ambitious strategy. It filed for bankruptcy protection this past December.
The Quebec government had already invested tens of millions of dollars in Lion and when it refused to inject more public money into Lion earlier this month, it seemed the manufacturer would die and its assets sold off in pieces to pay debts and liabilities. But Mr. Wilkie and his group have agreed to provide new capital, bolstered by the renewal of a provincial government subsidy program that offers incentives to buyers of electric buses.
Lion said the new investors would take the company private. Retail shareholders will probably be wiped out while other investors could also lose the bulk of their holdings.
Lion is one of Quebec’s homegrown hopes in the auto industry’s electrification and one of several key players in Premier François Legault’s plan to make Quebec a hub for battery materials and EV development. The company has more than 2,200 electric vehicles on the road and its renaissance under new ownership will likely be cheered by bus operators worried about servicing their fleets.
Lion used its early financial resources to build its main school bus business and expand into all-electric truck production, launching an innovation centre and two other manufacturing plants as well, including one in Joliet, Ill. But it had trouble scaling up operations and fell victim to government bureaucracy in both Canada and the United States, complaining in particular of delays tied to the granting of subsidies under the Canadian government’s $2.75-billion Zero Emission Transit Fund.
The company will almost certainly adopt a more modest business plan as it emerges from bankruptcy, one centred on electric school buses made at a factory in Saint-Jérôme. Much of its future will hinge on its ability to re-establish its reputation and generate enough sales to build its business back up, said Yan Cimon, a professor of strategy at the Université Laval Faculty of Business Administration.
“The future of Lion is going to be a long road,” Prof. Cimon said in an interview. “They’re not going to be able to be everything to everyone.”
The Quebec government stands to lose about $140-million pledged to the company while the federal government could lose $50-million, according to a tally from news releases. Other creditors include National Bank of Canada and the Caisse de Dépôt et Placement du Québec.
Transactions related to the sale are to be implemented by a reverse vesting order issued by the Superior Court, which is overseeing the company’s bankruptcy protection under the Companies’ Creditors Arrangement Act (CCAA), Lion Electric said.
A reverse vesting order allows for the transfer of liabilities and unwanted assets out of a debtor company into a newly created “residual” company, according to law firm Norton Rose Fulbright, which has represented at least one client that has used the mechanism. The end result is to “expunge the existing corporate structure of the debtor companies of anything the purchaser does not want,” the law firm said in a note on its website.