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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In the second part of Tesla’s master plan, which was revealed last month, Musk had mentioned that Tesla is ready to scale the Powerwall and Powerpack storage products, while SolarCity is nearly ready to offer next-generation solar panels. 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. On the call, the companies said they expect to achieve $150 million in cost synergies within the first year. Both companies said they expected to receive those approvals and close the deal by the end of the year. In addition, stockholders of SolarCity will get 0.110 Tesla common shares for each SolarCity share, the companies say, adding that SolarCity common stock is placed at a $25.37 value per share (lower than the previously predicted $26.50-$28.50 value).
For an executive who has long viewed Tesla’s trajectory through an ambitious lens aimed at combating climate change by ushering in a renewable energy world, the SolarCity deal is a key part of the puzzle. The deal will likely be finalized in the 4th quarter of this year.
Neither Tesla nor SolarCity are profitable, as most of the finds have been used to raise more capital, instead of product sales, reports The LA Times. Tesla Motors, in its official blog, said that solar and storage systems go hand and hand.
Earlier today, both SolarCity and Tesla moved a step closer for the completion of deal as Tesla’s offer of $2.6 billion all stock transaction was accepted by SolarCity.
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SolarCity’s shares were down 5 percent at US$25.36 in premarket trading on Monday. Incidentally, Musk is the biggest shareholder in both Tesla Motors Inc. and SolarCity Corp. In July, Tesla made an offer of 0.122 to 0.131 shares for every SolarCity share. The independent members of the two companies’ boards were also advised by independent legal and financial advisors.
