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Plan to merge Tesla, SolarCity expands importance of the RiverBend factory

The audacious plan by South African-born billionaire and entrepreneur Elon Musk to strengthen two companies while creating what is being called an integrated sustainable energy model will have a huge impact on the region.

Tesla Motors, the cutting-edge company producing high-priced electric cars with state-of-the-art features, has formally agreed to acquire SolarCity for $2.6 billion.

If shareholders approve, the deal would link the futures of both companies and be felt in Western New York. The state, in the largest part of Gov. Andrew M. Cuomo’s Buffalo Billion program, is building a giant factory for SolarCity at South Buffalo’s RiverBend. The state will own the facility, which will be outfitted to suit SolarCity. It is slated to become the largest solar panel factory in the Western Hemisphere when it opens in mid-2017.

The acquisition would combine three related green energy technologies: electric vehicles, improved batteries and rooftop solar energy systems.

Futuristic? Of course. Musk has shown he is comfortable with futuristic ideas, as evidenced in his SpaceX company, intended to revolutionize space travel.

Tesla recently announced plans for the world’s largest battery “gigafactory” in Nevada, which fits into the need for homeowners to store energy derived from their solar panels. Said Musk: “The entire deal is essentially driven by the need to bring together the product on the battery side and the product on the solar side.”

Potential savings to the combined company: an estimated $150 million to $200 million during the first year alone. The entrepreneur called those figures conservative. And there is savings on hardware, manufacturing and installation expenses and the lowered cost of finding new customers.

For now, both companies have been losing money. As News business reporter David Robinson wrote, they are burning “through hundreds of millions in cash each year.” With that, the notion of a merger has some investors reeling. Musk is deeply rooted in the two companies, owning 20 percent of the stock in each. He is chairman of SolarCity and CEO of Tesla. Musk’s cousin, Lyndon Rive, is SolarCity’s CEO.

Musk has recused himself from voting on the deal, which requires approval by a majority of “disinterested shareholders,” those who do not have strong business or family ties to Musk. The agreement allows SolarCity a 45-day window to “go shop,” giving the company time to seek out other purchase offers through Sept. 14.

The visionary must convince those on the fence that the merger is advantageous for all parties, and then faces the even more difficult task of making it so. The outcome is likely to impact this region for decades.

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