According to a joint blog from the companies, the electric vehicle and battery maker will acquire the residential solar provider in an all-stock, $2.6 billion deal.
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The deal will see SolarCity stockholders receive 0.110 Tesla common shares for each SolarCity share they hold, placing a value of $25.37 on SolarCity stock. The new company would tie up two-money losing entities, dependent on borrowing from the market together, adding potential for risk along with its opportunity to vertically integrate its products.
SolarCity has until September 14 to solicit for buyers under a “go-shop” period.
But Musk said the companies have a lot of synergies that they can’t take advantage of unless they’re combined. Tesla previously said it would offer $23.56 to $25.30 per SolarCity share. The transaction is expected to close in the fourth quarter of 2016 and will require a majority of the disinterested shareholders of both Tesla and SolarCity voting at each shareholder meeting.
Elon Musk said that the merged company could offer a single source of hardware for a low carbon lifestyle to its customers. Last week Mr Musk described the initial separation of the two companies as “largely an accident of history”. If approved by shareholders, the deal would create a major provider of energy and energy storage. Tesla’s shares fell 1.3 percent to $231.71.
Tesla is working feverishly on its new, lower-cost Model 3 sedan, which is due out by the end of next year, as well as pickups, electric buses and semi-trucks. SolarCity’s C-suite includes Musk as CEO, chairman and co-founder and his two cousins, Lyndon and Peter Rive, as chief executive and chief technology officer, respectively.
“We can’t do this well if Tesla and SolarCity are different companies, which is why we need to combine and break down the barriers inherent to being separate companies”.
The vehicle maker said it expects to save US150mln in the first year as well as efficiency improvements from the tie-up, while beefing up the pair’s combined balance sheet.
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Tesla had made an offer to buy SolarCity in June, but a deal was not certain because SolarCity had formed a special committee to review the offer.
