Blog Coverage Tesla to Acquire SolarCity for 2.6 Billion Dollars

LONDON, UK / ACCESSWIRE / August 2, 2016 / Active Wall St. blog coverage looks at the headline from automotive and energy storage major Tesla Motors Inc. (NASDAQ: TSLA) as it announced, on Monday, August 1, 2016, an agreement to buy SolarCity Corp. (NASDAQ: SCTY) for $2.6 billion, in its enterprise to offer American customers a single source of hardware to power a low-carbon lifestyle. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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Founded in 2003, California-based Tesla Motors deals in designing, manufacturing and selling luxury electric cars, electric vehicle powertrain components, and battery products. SolarCity, founded in 2006, deals in designing, financing and installation of solar power systems across US. The latter declared an operating loss of $768.8 million in 2015. CEO of Tesla Musk, is also the chairman of SolarCity and owns 22% of the company’s stock. SolarCity has been founded by his cousins, brothers Peter and Lyndon Rive.

The merger is Elon Musk’s strategy to combine both his electric-car and solar-power companies to form a one-stop stop for clean energy.

Multi-utility power

Musk has stated that the merger would benefit end-users who can install solar panels on their roofs, send power to Tesla storage batteries in their homes and to Tesla cars in their garages. SolarCity’s market capitalisation is $2.45 billion, while Tesla is worth $32.96 billion as of yesterday’s close. The deal’s value is much lower than what Musk proposed originally on June 21, 2016, of range between $26.50 to $28.50 to $25.83 per share, according to Friday July 29, 2016’s closing prices. If stakeholders approve the deal, it would result in Tesla’s workforce doubling to 30,000 employees. On August 1, 2016, Musk said if SolarCity finds another buyer at a higher price, then independent board members would be compelled to accept the offer.

In a statement, Tesla and SolarCity said the joint company would recognise $150 million in cost savings in the first full year after closing the transaction. The cost cutting could come from lowering SolarCity’s cost to obtain customers by leveraging Tesla’s strong brand recognition and retail store locations. Tesla is also reportedly aiming at producing a bevy of self-driving cars for ride-sharing services, which could rival Uber and Lyft.

Cost concerns

SolarCity’s CEO Lyndon Rive told investors that the company needs Tesla’s manufacturing expertise and retail strength to lower its costs and accelerate its growth. “We’ll be able to provide energy at a lower cost than traditional forms of energy,” he said.

“It’s really all part of solving the sustainable energy problem. That’s why we are all doing this to accelerate the advent of a sustainable energy world. I think $150 million is conservative. I think we will significantly exceed that in the first year,” Musk stated.

Musk stayed clear from the price of the deal, which has him in the center of the deal because of his involvement with both companies. “I was fully recused from the matter, so I know about as much as you do about how this price was obtained,” added Musk.

How shares fared

Tesla shares fell 2.04% to $230.01. The stock has gained 8.35% in the past one month.

SolarCity’s shares, which had jumped 26% since Tesla first made the offer on June 21, tumbled 7.42% at $24.72 on August 1, 2016, following the announcement. SolarCity shares have gained 3.03% in the past one month.

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