Tesla, SolarCity reach $2.6B merger deal

Tesla will pay approximately $2.6 billion for solar panel maker SolarCity in an all-stock deal. With solar-panel installer SolarCity on board, Tesla could integrate solar cells onto the roofs of its vehicles and pair solar panels with its new energy storage products. “It’s really all part of solving the sustainable energy problem”, Musk said.

Both Tesla Motors and SolarCity are confident that the deal will be closed by the end of this year.

Elon Musk announced back in June that Tesla wished to purchase solar power company SolarCity.

Musk himself appears to see a congruence of interests between the two companies, not a conflict.

The merger agreement includes a 45-day “go-shop” period during which SolarCity would be open to alternative acquisition proposals.

Tesla, and Musk, say storage and solar are at their best when they’re combined.

The electric vehicle manufacturer added that now is the right time for the merger citing the reason that it is getting ready to scale its Powerwall and Powerpack stationary storage while SolarCity is preparing to offer its next-generation differentiated solar solutions. Mr. Mok has reaffirmed a Hold rating on SolarCity stock, while he has not provided any rating on Tesla stock.

Tesla shares were up 0.1 percent in pre-market trading to $235 on Nasdaq shortly after the deal was revealed.

Reuters quoted some analysts as voicing skepticism that the Tesla-SolarCity merger will lead to a quick turnaround, in part because both companies are highly leveraged. Shares of SolarCity have actually surged over the last few months, so it’s not clear why the price tag got cut.

Tesla said that a joint company would plan to cut about $150 million in costs through the transaction in the first full year after the deal closes.

Further savings are expected through lowered hardware costs, reduced installation costs, improved manufacturing efficiency and lowering customer acquisition costs. It must be approved by a majority of voting shareholders in both companies.

“We believe SCTY shareholders are likely to approve the deal and we are increasingly confident that the deal will win Tesla’s shareholders’ approval”.