“Solar and storage are at their best when they are combined”.
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The two companies announced the all-share deal, which had been expected for several weeks, on Monday, although its lower-than-expected price sent shares in SolarCity falling, reports The Telegraph.
As a combined company, each business unit will work together to create fully-integrated solar power and battery-storage products for residential homes and commercial businesses, as well as full-scale grid projects. The idea is to use Tesla’s range of energy storage products to store energy generated from SolarCity’s solar panels, thereby creating a one-stop shop for renewable energy purchasing, installation, and management.
SolarCity shares tumbled 6.2 per cent to US$25.04 in midday trade, while Tesla dipped 0.7 per cent to US$233.18. Tesla, the electric vehicle company that sounds like a metal band, also has Musk as its largest shareholder. Tesla had handed out an offer to purchase SolarCity in June, but a deal was not certain since SolarCity had whipped up a special committee to evaluate the offer.
Through this merge, Musk expects to achieve cost synergies of $150 million in the first full year following the final close on the acquisition.
“The potential is there for Tesla to be a $1 trillion market cap company, if we play a major role in transitioning the world to a new form of energy generation, and storage and transport”, Musk told investors in June, CNN reported.
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Tesla stock fell 10% after it first disclosed the possible deal for SolarCity. Elon Musk is the chairman of both companies and remains the largest shareholder of both. In a staggering coincidence, Tesla just officially bought SolarCity for $2.6 billion, the AP reports. The deal is also contingent on a green light from shareholders as well as financial regulators. As part of the agreement, SolarCity said that it has a 45-day period known as a “go-shop”, which runs through September 14, 2016 and means that SolarCity is allowed to solicit alternative proposals during that time. And SolarCity shareholders will now have to decide whether they want to sell shares before the deal closes, or become Tesla shareholders.
