SolarCity Corp SCTY.O agreed to be acquired by sister company Tesla Motors Inc TSLA.O in a deal worth $200 million less than the initial offer, sending shares of both companies down in early trading on Monday.
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And others are confident that the Pennsylvania firm could greatly benefit by tagging along with Tesla, as the two would create a one-stop shop for energy storage and electric cars and give the smaller firm more visibility in the market.
In a joint statement both the companies stated that the “Solar and storage are at their best when they’re combined”.
Mainly, Tesla aims to tap into SolarCity’s business so it can offer residential, commercial, and grid-scale integrated solar and energy storage products. In addition to his role with Tesla, Musk is also the chairman and largest individual shareholder of SolarCity.
Tesla expects the transaction to close in the fourth quarter of the year.
SolarCity has a 45-day “go-shop” period to solicit deals for more eager buyers, though a withdrawal from the deal would cost executives up to $78.2 million in fees.
Under the terms of the merger agreement, SolarCity shareholders will receive each 0.110 of Tesla’s common shares per SolarCity share.
When the companies first announced their intentions to merge in June, Musk said the combination would make selling clean energy “completely seamless, painless”. SolarCity share is valued at $25.83 according to the closing prices on Friday.
Musk said, “That [Telsa and SolarCity] are separate at all, despite similar origins and pursuit of the same overarching goal of sustainable energy, is largely an accident of history”.
SolarCity has struggled to gain traction with its rooftop solar-panel services, and the price specified in the merger deal is less than half of what it was a year ago. Tesla shares were up 0.51 percent at $235.99. So has Antonio Gracias, who sits on the board at both companies. Mr. Mok has reaffirmed a Hold rating on SolarCity stock, while he has not provided any rating on Tesla stock.
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SolarCity has until September 14 to field other offers from potential suitors, but no other serious bidders are expected to come out of the woodworks.
