In order to establish what the two call “the world’s only vertically integrated sustainable energy company”, Tesla and SolarCity have come to terms on a multibillion-dollar merger deal.
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California-based Tesla is known as a pioneer in electric cars but since past year has also been selling batteries that can power homes and businesses. Tesla said the combination would create the world’s only “integrated sustainable energy company”.
With SolarCity’s focus on renewable energy, and Tesla’s focus on storage, Musk apparently believes now is the flawless time to combine the two companies, especially as Tesla aims to grow its Powerwall product. The companies say that by joining forces they can more efficiently integrate their products and provide customers with a one-stop solar and storage shop. The firm also expects to save customers money by being able to lower hardware and installation costs and by improving its manufacturing efficiency.
Some Wall Streets analysts have criticized the move, citing a conflict of interest, given that Musk also serves as chairman of SolarCity. The deal is expected to be finalized by the end of 2016.
SolarCity has a 45-day “go-shop” period in which it can solicit alternative acquisition proposals.
SolarCity uses Elon Musk’s Tesla battery packs under a partnership between the two companies.
“Solar and storage are at their best when they’re combined”, Tesla wrote on its website.
It will be an all stock deal where shareholders of SolarCity will receive a 0.11 share in Tesla for every share held. SolarCity share is valued at $25.83 according to the closing prices on Friday. Tesla’s proposed buyout comes just a month after the electric auto maker’s initial all-stock offering. It estimates that the first year saving after the merger would at least be $150m.
This deal requires approval of the disinterested shareholders of both companies, as well as regulatory approval.
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In its more recent announcement, Tesla said that the it expects the merged companies to achieve cost synergies of $150 million within the first full year.
