Tesla Motors is offering more than US$2.5 billion to buy residential solar installer SolarCity, a company owned by Tesla founder Elon Musk’s cousin, Lyndon Rive, and whose board of directors Musk chairs.
The Tesla offer works out to a premium of about 21 to 30% over SolarCity’s closing stock price of US$21.19 Tuesday afternoon. On news of the announcement, SolarCity stock rose in after-hours trading, while Tesla shares plunged from $219.61 to around $195.
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“A 21 to 30% premium on a depressed stock price, paid entirely in equity in another risky company,” commented one GTM Research analyst. “Don’t know that I’d take this as a SCTY [SolarCity] shareholder.”
But Tesla maintained in a release that the combined firm “”would be the world’s only vertically integrated energy company, offering end-to-end clean energy products to our customers. This would start with the car that you drive and the energy that you use to charge it, and would extend to how everything else in your home or business is powered.”
A customer who adopted the entire product line “would be able to deploy and consume energy in the most efficient and sustainable way possible, lowering your costs and minimizing your dependence on fossil fuels and the grid.”
The two companies’ board of directors will vote on the offer after due diligence has been completed, Greentech reports. Musk said he would recuse himself from the vote, according to UtilityDive, explaining that the merger “will only move forward if there is a majority vote of the non-me shareholders in both companies.”
Nonetheless, the visionary entrepreneur called the proposed merger a “no-brainer” and “an obvious thing to do,” to advance the integration of the two companies’ complementary product lines and offer the most compelling experience to consumers. “The question was timing.”
