But Tesla defended the logic of creating a single company to boost solar generation and storage to power electric cars, charging stations, homes and offices. This means one company will be able to provide solar and storage with one installation, one service contract and one phone application, Tesla says.
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At present the electric auto maker has plans to extend its product range of Powerwall and Powerpack storage systems while SolarCity has plans to introduce next generation differentiated solar solutions.
In a deal that will cost Tesla approximately $2.6 billion, SolarCity shareholders will receive 0.11 shares of Tesla stock for each share of the San Mateo-based solar power systems provider.
Tesla’s stock exchange offer valued SolarCity at $200 million less than the initial proposal outlined in June, or at $25.37 a share, before the company’s advisers, had done due diligence.
Tesla Motors Inc. said it posted a loss of $293 million in the second quarter, almost 60% wider than a year ago, as deliveries fell short of expectations and expenses rose.
Tesla Motors, in its official blog, said that solar and storage systems go hand and hand.
The deal would save about $150 million in the first full year, the companies estimate.
SolarCity, which was founded in 2006 and headquartered in San Mateo, has a 45-day “go-shop” period to seek an alternative suitor. Elon Musk is said to have been involved in the project from its genesis. The deal will have to be approved by a majority of shareholders of both companies.
“This is really all part of solving the sustainable energy problem”, said Elon Musk, the chairman and biggest shareholder of both companies, during a conference call.
Neither company is yet profitable, and USA Today notes that SolarCity made an operating loss of $US 768.8 million in 2015.
Musk, however, has pitched the deal as a logical combination of two companies with similar missions, cultures and customers. The transaction worth $2.6bn will also allow lowering hardware and installation cost, the firm believes. Earlier, Tesla’s stock fell $1.41, or 0.6 percent, to $225.79 a share.
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In the meantime, markets and market watchers have responded less certainly than Shah, with share prices tumbling 4.14% and 1.92% at SolarCity and Tesla, respectively, since announcement of the deal on Monday (August 1).
