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Smith EV Buys UK Counterpart: Next Stop NASDAQ?

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Smith Electric Vehicles U.S., a Kansas City, Mo.-based maker of electric trucks, will step into 2011 with a much larger footprint than it had in 2010. On the first of the new year Smith U.S. will complete the acquisition of Smith Electric Vehicles UK. That’s the British electric vehicle division of the Tanfield Group, the UK parent of the two Smiths that’s hoping its 49 percent stake in the new combined entity will lead to a big pay day if Smith U.S. goes through with long-discussed plans for an IPO.

Under a contract announced last week and set to go into effect on January 1, Smith U.S. will pay Tanfield $15 million for the business and certain assets of Smith UK, split into 20 monthly payments. But in the event that Smith U.S. goes public, according to Tanfield’s notice to shareholders, the full balance of the $15 million would be due immediately.

Tanfield could use the cash. The company makes aerial work platforms and electric vehicles for the commercial sector, and it was hit hard by the credit crunch and global slump in the construction sector. During the first half of this year, Tanfield’s net cash balance dropped £3.2 million to £2.2 million — a decline that the firm attributed to “adverse trading conditions.”

The $15 million deal between Tanfield and Smith U.S. has been in the works for much of this year. The idea, as Smith U.S. CEO Bryan Hansel explained to us in an interview back in March, has been to create one nimble electric truck maker that can reach a global market. Hansel compared Smith’s approach to that of Southwest Airlines, which uses a point-to-point flight routing system, as opposed to the more common model of routing flights through one main hub with many spokes. Rather than setting up one or a few large-scale manufacturing facilities, Smith’s model calls for decentralized production, with smaller-scale facilities serving each market.

It was in March that Smith U.S. first floated a conditional offer to buy Tanfield’s 49 percent stake in Smith U.S. and also acquire the British Smith U.K. unit. The offer reportedly included £37 million ($56.13 million) in cash, plus a £33.3 million ($50.52 million) stake in the new, combined Smith Electric Vehicles if it manages to go public before September 2015.

Within a few months, however, Tanfield had decided against divesting itself from Smith, after Smith U.S. saw its U.S. stimulus funding more than tripled and the company jumped into the limelight with a visit from President Obama at its Kansas City plant.

“Tanfield believes that SEVUS will be well positioned as a U.S. Company solely dedicated to low carbon transport technologies to take full advantage of the positive commercial and financial environment,” Tanfield noted in an August filing about the proposal to combine Smith U.S. and Smith UK.

Tanfield’s outlook on the commercial electric vehicle market is especially bright for this side of the pond, thanks to a “number of Federal and state initiatives to drive demand and application,” the company wrote in an August earnings statement. As a result, according to Tanfield, “It is very likely that future growth in the U.S. will be significantly more rapid than in the European market.”

But is Smith U.S. really ready to go public? And are the public markets ready for another EV IPO? As Katie noted recently, 2010 brought some improvements in the appetite for the public markets for cleantech companies, particularly given the successful IPOs by Tesla Motors (s TSLA) and biofuel maker Amyris (s AMRS).

However, aside from their shared focus on electric vehicles, Smith U.S. and Tesla could hardly be more different. Tesla has its carefully crafted high-profile, glitzy brand, consisting of luxury vehicles priced for a sliver of wealthy consumers (although lower-priced models are set to launch in the coming years). Smith U.S., on the other hand, has kept a low profile building electric trucks for unglamorous commercial fleets.

But what it may lack in glamour, Smith U.S. does not lack in opportunity, with governments and companies increasingly investing in lower-emission fleets. Research suggests fleets remain quite cautious about adopting new vehicle technologies at this point, but more and more fleet managers are paying attention to what’s coming out of their vehicles’ tailpipes and setting environmental goals for their fleets. That opens doors for electric truck makers offering lower maintenance costs, stable fuel prices and other benefits of kicking the diesel and gas habit.

For the long haul, the more important question with Smith’s possible IPO may be whether demand will reach a point where it warrants a fundraising effort on the public markets — which would be good news for the electric vehicle market at large. As Hansel told us earlier this year, “If we see a number of markets opening up,” then the company may seek an IPO to fund a rapid expansion.

Image courtesy of SEVUS

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