Tesla Offers to Acquire SolarCity

BREAKING CNBC just reported that Tesla Motors Inc.

Tesla’s stock (TSLA) is down over 10% in aftermarket following the news, while SolarCity’s (SCTY) is up 23%.

SolarCity shares have been under pressure, down more than 58 percent year to date. It says this equates to a value of $US26.50 to $US28.50 per share, or a premium of about 21 per cent to 30 per cent over the closing price of SolarCity’s shares. Musk saw this as a compelling solution and a “no-brainer” where a consumer can go into a store and “with a few clicks” buy an electric vehicle, a solar system and an energy storage system. And in March 2015, we launched Tesla Energy, which through the Powerwall and Powerpack allow homeowners, business owners and utilities to benefit from renewable energy storage.

The claim of the purchases is that this would make Tesla the only vertically integrated energy player with end-to-end clean energy products.

It will offer its own stock to complete the merger, proposing 0.122 to 0.131 of its shares for each share of SolarCity common stock. He is chairman and chief executive of Tesla Motors and owns 21% of that company.

Tesla said it offered $US26.50 to $US28.50 per share for SolarCity, which represents a premium of about 25 per cent to 35 per cent to the company’s Tuesday close of $US21.19.

Because of the overlap of Musk and fellow board member Antonio Gracias, a partner of investment firm Valor Equity Partners, Tesla said that both individuals recused themselves from the Tesla board vote on whether to make the offer.

SolarCity and Tesla have never been very distant.

Tesla said its board “is excited at the prospect of a potential combination of SolarCity’s business with Tesla”. We do not anticipate significant regulatory or other obstacles in consummating a mutually beneficial transaction promptly.

The offer, announced in a blog post, would value SolarCity at $2.8 billion.