Tesla CEO Elon Musk is often compared to the late Steve Jobs, as a Silicon Alley visionary. In reality, it was the car’s self-driving system that had difficulty dealing with the sharp turns on a Los Angeles highway.
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But Musk said the companies have a lot of synergies that they can’t take advantage of unless they’re combined. However, liability concerns raised by other executives apparently made him reconsider his decision.
The automaker has estimated cost synergies worth $150 million by 2017, first full year after the deal closing which is expected in the fourth quarter of this year.
The combined entity would sell solar panels, residential and commercial battery storage systems and electric vehicles under a single brand.
The deal must still be approved by the government and shareholders at both companies. And SolarCity is run by his cousin, Lyndon Rive.
Earlier today, some sources whispered that Tesla Motors Inc (NASDAQ:TSLA) and SolarCity (NASDAQ:SCTY) will announce the anticipated merger deal on Monday. Tesla’s shares fell 2 percent to $231.01. “Until then it’s very limited what we can do unless we are one company”.
THE QUOTE: Steve Chiavarone, associated portfolio manager for Federated Investors, said the dollar is getting stronger, and that’s starting to hurt oil prices and slow down USA manufacturing. Tesla has lost $1.2 billion in the past two years alone while SolarCity has suffered losses exceeding $1.1 billion during the same span. Analysts surveyed by FactSet are predicting a 416 million loss from Tesla this year while they believe SolarCity will lose $851 million. Tesla plans to lower hardware and installation costs, improve production efficiency, and reduce customer acquisition costs via the acquisition. SolarCity, conversely, formed a special committee which included Skadden, Arps, Slate, Meagher & Flom as legal advisors and Lazard as financial advisor.
The offer values SolarCity at $25.37 per share, based on the five-day volume-weighted average price of Tesla shares as of Friday.
Up to Friday’s close, Tesla shares had risen 7 percent since the company first announced the offer.
The merger agreement is likely to include a so-called go-shop provision that will allow SolarCity to continue to solicit offers from other potential buyers for a short period of time following its signing, the people said on Sunday. In such an instance, SolarCity would pay a $26.1 million termination fee, according to a regulatory filing.
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In June, Tesla offered 0.122 to 0.131 of its shares for each SolarCity share.
