He just got one giant step closer.
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Tesla Motors said it will buy solar panel installer SolarCity for $2.6 billion in shares to form a one-stop clean energy shop.
When Elon Musk revealed his proposal to acquire SolarCity in June, investors moaned and Tesla’s stock dropped, but his plan is about transforming the energy landscape on our planet, not about short-term profits. What if Tesla shareholders do not approve this deal?
Up to Friday’s close, Tesla shares had risen 7 percent since the company first announced the offer. It must be approved by a majority of voting shareholders in both companies.
Tesla said the merger creates the world’s only vertically integrated sustainable-energy company.
SolarCity’s shares were down 5 percent at $25.36 in premarket trading on Monday. The amount Tesla has offered is on the low range with SolarCity shareholders receiving 0.11 share of Tesla for each SolarCity share. That’s less than the $26.50 to $28.50 value it placed on them in June, when it made its initial overture to SolarCity. Speaking before the deal was finalised, Musk said: “My personal opinion is that obviously this is something that should happen – like it’s a no-brainer”. Musk, who founded Tesla, has turned a $3 billion company into a $31 billion company, but investment advisor Anthony Ogorek says Solar City is losing money in the hundreds of millions.
Mr Musk ultimately plans to develop a fleet of Tesla electric pickup trucks, lorries and buses, which will probably be unveiled next year. It’s Tesla biggest bet yet: a massive factory in the Nevada desert that could nearly double the world’s production of lithium-ion batteries by 2018. And it’s under investigation by the government after the semi-autonomous Autopilot system in its Model S failed to prevent a fatal crash in Florida. This includes installation of solar panels on the roofs, delivering required power to Tesla storage batteries. The company forecasts savings of $150 million in the first year for the combined corporations.
Some Wall Streets analysts have criticized the move, citing a conflict of interest, given that Musk also serves as chairman of SolarCity.
Tesla chief executive Elon Musk owns 22% of SolarCity and sits on the firm’s board.
But Manjoo questioned that concept, saying, “What’s unclear is why they can’t do that right now, why SolarCity can’t do that right now and what makes it better if these two companies are together”. “We will also be able to leverage Tesla’s 190-store retail network and worldwide presence to extend our combined reach”, Tesla added. According to credible sources who talked to Reuters, SolarCity agreed to the $2.6 billion buyout offer from the electric vehicle maker.
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Those markets are expected to grow over time, she said, but in the meantime, both businesses are capital intensive and buoyed by government incentives.
