Tesla Motors has announced the acquisition of SolarCity for $2.6 billion in shares. Touted to create a one-stop green renewable energy system, the SolarCity is a reputed solar panel installation company in the US. After the merger process is completed, the combined company will sell solar panels, home battery storage systems in addition to electric cars under a single brand.
As part of the deal, SolarCity shareholders will receive 0.110 Tesla common shares per SolarCity share. This will account to $25.37 per share based on the 5-day volume weighted average base price of Tesla shares as of July 29. Interestingly, the shares of SolarCity closed at $26.70 on Friday.
The deal has been sealed with a go-shop provisioning system, which will run until September 14. This will enable SolarCity to accept offers from other potential buyers for a short period of time.
According to industry analysts, the acquisition is part of billionaire Elon Musk’s strategic plans to combine the electric car manufacturer with the solar panel installer.
Initiative of Elon Musk
In July, Musk initiated his master plan ‘part deux’, which calls for the need to form a combined company to offer consumers with a single source of hardware to power a low-carbon lifecycle.
Before coming to a deal, SolarCity has formed an independent internal committee to review Tesla’s offer without adding Musk to the team. This is done for an unbiased review of the merger deal and also to avoid possible conflict of interest since Musk has positions of interest in both the companies.
According to Musk, Tesla in association with SolarCity helps to reach prospective consumers more effectively by installation a wide range of functions. This includes installation of solar panels on the roofs, delivering required power to Tesla storage batteries.
After the merger, batteries from Tesla’s $5 billion Gigafactory outside Sparks, Nevada will be the property of the combined enterprises. Even though the existing shareholders of Tesla were bit hesitant to accept the acquisition, they have gradually warmed up after the announcement. In the meantime, Tesla shares recovered and ended trading on July 29 at $234.79 to $190 per share.
In addition to Musk, several executives from Tesla and SolarCity have recused themselves from voting when the merger proposal comes up for voting. This includes SolarCity CEO Lyndon Rive and SolarCity board member Peter Rive.
Meanwhile, the company is scheduled to release its Q2 2016 results on August 3. The company recently revealed that its shipments for the quarter fell short of its expected predictions.
Tesla products under scrutiny
Recently, the US National Highway Traffic Safety Administration revealed that their team members have been investigating a fatal road accident, which killed the driver of a Tesla Model S.
The accident occurred when the driver was working with the Autopilot mechanism. According to reports, the failure in the brake and steering caused the fatal incident.