Tesla to buy SolarCity in $2.6 billion stock deal

About a month after Tesla announced its offer to acquire SolarCity, the two companies have now reached an agreement to be combined.

Elon Musk’s Tesla Motors Inc. has agreed to buy SolarCity Corp. for $2.6 billion, in an all-stock deal that would double Tesla’s workforce to 30,000 people and, Musk hopes, make it possible for the company to bring solar energy to the masses.

Tesla will pay 0.11 share of its stock for each share of SolarCity, which it said is worth $25.37 based on the five-day average of Tesla’s share price as of Friday. Indeed, Tesla envisions a future where customers are offered one integrated product and one service contract, along with the ability to purchase SolarCity’s products in Tesla’s 190 retail stores. Analysts have said in the past that the price is too low and investors have questioned the wisdom of Musk combining his electric-car maker with the clean-energy company.

The companies said the agreement had been brokered following a comprehensive due diligence process in consultation with independent financial and legal advisors.

The deal is expected to close in the fourth quarter of 2016, after shareholders have been given the chance to vote on the deal and approval has been sought from regulators.

In most acquisitions, it wouldn’t be until Monday’s announcement of detailed terms of a deal that a potential acquisition would even be announced. Shares of SolarCity fell almost 5 percent on the news, as the price tag was about $300 million less than Tesla offered in June.

In the accompanying statement, Tesla and SolarCity explain that they believe this merger will allow consumers to gain access to the alternative-energy sources at a lower cost.

Tesla gave investors insight on Monday into its reasons for the acquisition.

Tesla wants to offer solar options to a consumer base that’s already interested in green energy – electric vehicle owners.

The company also reiterated its plans to use the merger to create a “one-stop-shop” for electric vehicles, renewable energy, and energy storage technologies.

“Solar and storage are at their best when they’re combined”, the companies said in a blog post on Tesla’s website. In his speech, he did note that the carmaker is planning to release an “integrated and handsome solar-roof-with-battery product”. According to Tesla, the deal could represent $150 million in cost savings during the first full year after the deal closes, which is nothing to scoff at.