Tesla TSLA, -1.02% said it had reached a deal to buy SolarCity SCTY, -7.29% for $2.6 billion, lower than the original range the electric-car maker had proposed in June, when it first announced its offer. Tesla said the combined company would create the world’s only integrated sustainable energy company, able to provide customers with power generated by SolarCity panels, stored in Tesla home and commercial battery packs and fueling electric vehicles.
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“By joining forces, we can operate more efficiently and fully integrate our products”. The transaction worth $2.6bn will also allow lowering hardware and installation cost, the firm believes.
“We expect to achieve cost synergies of US$150m in the first full year after closing”.
The companies said yesterday that SolarCity stockholders would receive 0.110 Tesla common shares for every share held.
While the deal has been approved by the independent board members of Tesla and SolarCity, it must now also win support from a majority of disinterested shareholders at both companies. SolarCity formed a special committee to evaluate the Tesla offer, and Musk said he had no say in the final acquisition price.
SolarCity, based in San Mateo, Calif., was started in 2006 by brothers Peter and Lyndon Rive with help from Musk, their cousin.
“Solar and storage are at their best when they are combined”.
As Quartz has noted before, combining the two companies could help Musk sell more Tesla batteries for storing solar energy in home installations-which would give him an important advantage in competing with politically powerful utility companies.
A couple of months ago Tesla offered 0.122 to 0.131 of its shares for everting SolarCity share. He is also the largest shareholder in both companies.
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Tesla says that it expects the merger with SolarCity to be finalized by the fourth quarter of 2016. It will have to pay Tesla a $78.2 million termination fee unless it ends the deal with Tesla in order to enter an agreement with a third party that initially made an alternative offer before the “go-shop” period ended.
