SolarCity Corp agreed to be acquired by sister company Tesla Motors Inc in a deal worth $200 million less than the initial offer, sending shares of both companies down in early trading on Monday. Both companies have been burning through cash and have projected achieving positive cash flow later this year.
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The deal may draw more attention to the financial position of both companies.
Speaking to a few dozen reporters after Tuesday’s tour, the co-founder called the factory “incredibly romantic” and said he sees more gigafactories down the road for Tesla – and from other companies. The combined entity will offer consumers solar panels, home battery storage systems and electric cars under a single brand. “By joining forces, we can operate more efficiently and fully integrate our products, while providing customers with an aesthetically attractive and simple one-stop solar + storage experience: one installation, one service contract, one phone app”.
Combining the clean energy vehicle maker with the solar panel installer is a major part of billionaire Elon Musk’s strategy, who earlier in July unveiled his master plan “part deux” that calls for the combined company to offer consumers a single source of hardware to power a low-carbon lifestyle.
“Now is the right time to bring our two companies together: Tesla is getting ready to scale our Powerwall and Powerpack stationary storage products and SolarCity is getting ready to offer next-generation differentiated solar solutions”, Tesla said.
Under the terms of the agreement, SolarCity stockholders will receive 0.110 Tesla common shares per SolarCity share, valuing SolarCity common stock at $25.37 per share based on the five-day volume weighted average price of Tesla shares up to last Friday.
Musk said if someone makes a better offer for SolarCity, he has committed to vote his shares with that offer.
SolarCity, shares were down 5.1 percent at $25.34, while Tesla dropped 1.9 percent at $230.40.
Tesla and SolarCity expect to save $150 million in costs in the first full year after the deal closes as the combination would improve manufacturing efficiencies and reduce customer acquisition costs.
The remarks came a week after Musk unveiled his plan to turn existing Teslas into a “shared fleet” with the help of distributed learning of autonomous driving.
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At the end of May, the Fidelity OTC portfolio was the second largest mutual fund investor in Tesla with 3.14 million shares.
