Tesla says it has reached agreement to purchase SolarCity for US$2.6bn to create what it maintains is the world’s only vertically integrated sustainable energy company. Before then, the deal must be approved by a majority of the disinterested shareholders of both Tesla and SolarCity voting at each shareholder meeting.
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As a combined company, each business unit will work together to create fully-integrated solar power and battery-storage products for residential homes and commercial businesses, as well as full-scale grid projects.
Electric auto manufacturer Tesla announced its intention to buy SolarCity for $2.6 billion in stock in a blog post a little more than a month after it initially proposed the transaction.
The merger agreement includes a 45-day “go-shop” period during which SolarCity would be open to alternative acquisition proposals. SolarCity stockholders will receive 0.110 Tesla common shares per SolarCity share. Musk helped orchestrate the deal, but he stayed out of the review or the board vote to head off conflict-of-interest concerns. The promise of an affordable electric auto from Tesla Motors had hundreds of people lining up to reserve one. Tesla previously said it would offer $23.56 to $25.30 per SolarCity share.
Tesla has promoted the buyout as a natural fulfillment of its sustainable-energy commitment.
As well as being founder and CEO of Tesla, Musk is the chair and principal shareholder of SolarCity.
SolarCity has a market capitalization of $2.6 billion, while Tesla’s market cap is $34.6 billion.
Tesla expects the merger to cut costs by $150 million in the first year after the deal closes.
Musk himself appears to see a congruence of interests between the two companies, not a conflict.
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The grand plan of Silicon Valley billionaire Elon Musk to marry his companies Tesla Motors and SolarCity could become a reality, pending shareholder approval. Considering that Musk is the chairman of both companies and his cousins run SolarCity, it seems unlikely that the solar energy company will land with anyone else.
