Tesla Motors announced that it would acquire solar panel installer SolarCity to the tune of 2.6 billion in shares to come up with a completely clean energy shop.
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Under the all-stock deal, SolarCity shareholders will receive 0.11 share of Tesla for each share of SolarCity. The company expects the deal to close in the fourth quarter of 2016.
“This is really all part of solving the sustainable energy problem”, said Elon Musk, the chairman and biggest shareholder of both companies, during a conference call. 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.
Tesla Motors, in its official blog, said that solar and storage systems go hand and hand.
With SolarCity’s focus on renewable energy, and Tesla’s focus on storage, Musk apparently believes now is the ideal time to combine the two companies, especially as Tesla aims to grow its Powerwall product.
“By joining forces, we can operate more efficiently and fully integrate our products”.
But in trading Monday, SolarCity shares fell more than 7% to $24.74 while Tesla dropped 1.3% to $231.70 amid concerns about the companies’ cash flow and the rationale for the deal. By elevating the production of electric cars and self-driving cars, Tesla is looking forward to become the largest automaker.
While the deal has a lot to offer to Tesla, Baird analyst believes it is highly unlikely that the shareholders would approve the merger.
It has been reported today that Tesla and SolarCity have agreed to engage in a $2.6 billion merger which will allow the partnership to create “integrated solar and storage” solutions that are already under development.
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SolarCity leads the nation in rooftop solar systems for homes, however, it also routinely posts quarterly losses, and has seen its stock plummet nearly 60 percent this year. Tesla, the electric auto company that sounds like a metal band, also has Musk as its largest shareholder. After the first full year of operations as a joint company, they expect “cost synergies of $150 million”. In June, Tesla offered 0.122 to 0.131 of its shares for each SolarCity share.
