Mainly, Tesla aims to tap into SolarCity’s business so it can offer residential, commercial, and grid-scale integrated solar and energy storage products.
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Moreover, the deal was backed by a special committee at SolarCity, appointed to independently assess the offer and explore alternative strategic options.
The companies said the deal would also save customers money by lowering hardware costs and reducing installation costs.
Despite Musk’s assurances that the companies will be better off for merging, Wall Street initially hated the deal. Now that Tesla is ready to scale Powerwall and SolarCity is ready to provide highly differentiated solar, the time has come to bring them together.
The auto maker said it expects to save US$150mln in the first year as well as efficiency improvements from the tie-up, while beefing up the pair’s combined balance sheet.
Over the past 24 hours, rumors began circulating that Tesla would announce details of its anticipated merger with SolarCity today.
SolarCity said it now expects to install enough solar panels to generate between 900 megawatts and 1,000 megawatts of electricity, down about 10 percent from its previous forecast of 1,000 megawatts to 1,100 megawatts.
The company also reiterated its plans to use the merger to create a “one-stop-shop” for electric vehicles, renewable energy, and energy storage technologies.
Under the all-stock deal, SolarCity shareholders will receive 0.11 share of Tesla for each share of SolarCity. He is the largest shareholder at TSLA and SCTY, and Elon Musk is also the chairman of SolarCity.
SolarCity, based in San Mateo, Calif., was started in 2006 by brothers Peter and Lyndon Rive with help from Musk, their cousin.
But Manjoo questioned that concept, saying, “What’s unclear is why they can’t do that right now, why SolarCity can’t do that right now and what makes it better if these two companies are together”. Tesla expects to achieve cost synergies of $150 million in the first full year after closing.
Up to Friday, SolarCity’s stock had risen about 26 percent since Tesla first made an offer on June 21. In late July, Musk released details about part two of his master plan for Tesla, which included buying SolarCity to streamline the two companies’ energy production and storage efforts.
SolarCity stock is up more than 17 percent since Tesla’s original bid back in June.
Tesla shares fell 4 cents to $234.75 in midday trading in NY.
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During the most recent trading day, the stock’s price shifted up 66.46% from its 52-week-low while 13.54% lower from its 52-week high.
