Tesla Motors has finalized its offer to buy SolarCity for $2.6 billion – at the low end of the price range spelled out in its preliminary offer – in a bid to create Elon Musk’s vision of a sustainable energy powerhouse.
The deal, first proposed in June, would combine the nation’s leading installer of residential rooftop solar energy systems with the world’s biggest manufacturer of electric vehicles - all part of Musk’s long-term plan to create “the world’s only vertically integrated sustainable energy company.”
The deal also would combine two companies that already are closely intertwined, which has raised concerns among some analysts and investors. Musk owns more than 20 percent of the stock in both companies. He is chairman of SolarCity and CEO of Tesla. Musk’s cousin, Lyndon Rive, is SolarCity’s CEO.
“Now is the right time to bring our two companies together: Tesla is getting ready to scale our Powerwall and Powerpack stationary storage products and SolarCity is getting ready to offer next-generation differentiated solar solutions,” Tesla said in a blog post on Monday. “By joining forces, we can operate more efficiently and fully integrate our products, while providing customers with an aesthetically beautiful and simple one-stop solar plus storage experience: one installation, one service contract, one phone app.”
SolarCity shareholders .11 shares of Tesla stock for every SolarCity share they own – slightly less than the .122 to .131 shares that Tesla offered in its preliminary bid for the company in June. The latest offer would be worth $25.37 per SolarCity share.
Tesla said combining the two companies would result in $150 million in cost savings during the first year. Tesla also said combining the two companies would reduce hardware, manufacturing and installation expenses, while also lowering the cost of finding new customers – something that has been a stubbornly costly problem for SolarCity.
The agreement also gives SolarCity a 45-day window to “go-shop,” which essentially would allow the solar energy systems installer to seek out other purchase offers through Sept. 14.
Tesla said it expects the deal to close during the fourth quarter of this year, assuming SolarCity doesn’t get a better offer and shareholders of both companies vote to approve the merger. The deal also must be approved by regulators.