Tesla Motors and SolarCity could announce they have agreed to merge as early as Monday, people familiar with the matter said, setting the stage for a campaign to convince the two companies’ shareholders to back the deal.
Advertisement
The all-stock deal values SolarCity SCTY, -6.25% at about $2.6 billion.
Tesla will pay 0.11 share per SolarCity share, worth $25.37 based on the 5-day average of Tesla stock as of Friday.
Tesla has announced that it will merge with SolarCity, creating a 30,000-employee entity it claims will be “the world’s only vertically integrated sustainable energy company”. As part of his plan, Musk wrote that Tesla would be developing a solar roof that also has a battery product for his vehicles. That’s less than the $26.50 to $28.50 value it placed on them in June, when it made its initial overture to SolarCity. And SolarCity is run by his cousin, Lyndon Rive.
Musk said the combined companies will have a “stronger balance sheet”, but likely will require a “small equity capital raise” next year. Both companies have been burning through cash and have projected achieving positive cash flow later this year.
Musk said the plan to consolidate two clean energy businesses in which he has large stakes will remove barriers to growth between companies he always meant to function as one. Tesla is working feverishly on its new, lower-cost Model 3 sedan, which is due out by the end of next year, and Musk recently said the company is also working on electric buses and semi-trucks. The deal includes an unusually long “go-shop” provision that allows SolarCity to solicit offers from other potential buyers for 45 days through September 14.
Musk and Tesla Chief Financial Officer Jason Wheeler said the companies could save at least $150 million a year by combining sales forces, and sending one truck to a home to install solar panels, a Tesla energy storage system and a recharging system for a Tesla vehicle.
Tesla later this year plans to start production of auto batteries at its Gigafactory near Reno, Nevada. The companies share board members and major shareholders. The move will still need to be voted on by a majority of the two companies’ shareholders, and the merger will need regulatory approval and “other closing conditions”.
“When you create an industry, you only win because of speed”, Chowdhry said.
Now is the right time to bring our two companies together: Tesla is getting ready to scale our Powerwall and Powerpack stationary storage products and SolarCity is getting ready to offer next-generation differentiated solar solutions. After dropping to below $190 per share following the offer, Tesla shares have recovered and ended trading on Friday at $234.79.
Advertisement
The company’s outlook has darkened as government policies that underpinned the rooftop solar sector’s expansion in recent years face increased scrutiny in many USA states. Tesla’s shares fell 2 percent to $231.01.
