Electric auto maker Tesla said on Monday it won agreement from SolarCity to acquire the solar power company for US$2.6 billion, confirming a deal that has been criticized on Wall Street.
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Musk, who is also chairman and a major shareholder in SolarCity, unveiled an updated “master plan” last month in which he sketched out a vision of an integrated carbon-free energy enterprise, offering electric vehicles, auto sharing and solar energy systems.
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. Merging the two will result in all the products involving operations – generation, storage and transportation – coming from a single company, Tesla.
Tesla Motors has reached a deal to buy solar energy company SolarCity for $2.6 billion in shares, the automaker announced Monday.
Under the agreement, there will be a “go-shop” provision, which means Solar City has 45 days, until September 14, to see if they get a better offer than Tesla’s offer.
At a $25.83 per share price, SolarCity’s shareholders will add 0.11 Tesla shares for each SolarCity share they own.
Musk was already the chairman and 22.54% shareholder of SolarCity. Tesla says that it expects this approach will result in a less expensive system, due to lower costs for installation, as well as for the hardware itself.
The new entity would offer solar panels, home battery storage systems and electric vehicles. His cousins Lyndon Rive and Peter Rive are co-founders of SolarCity. Tesla expects the deal to finalise in the final quarter of this year, but must gain regulatory approval and meet other closing conditions before that happens. The deal will have to be approved by a majority of shareholders of both companies. Tesla shares increased by 0.51 percent at $235.99.
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Musk has positioned the merger as an essential step in his masterplan, which involves the development of an integrated solar panel and battery product based on the Powerwall.
