Tesla offers $2.8 billion to acquire SolarCity, a merger of two Elon Musk companies

Tesla has made an offer to acquire SolarCity, a leader in full-service solar power systems for homes, businesses and governments.

Elon Musk is the largest shareholder of both Tesla and SolarCity.

“The timing is driven by the product and providing compelling solutions to customers,” said Musk, chairman of SolarCity and CEO of Tesla.

Elon Musk is the the founder, CEO and CTO of SpaceX; co-founder, CEO and product architect of Tesla Motors; co-founder and chairman of SolarCity, co-chairman of OpenAI; co-founder of Zip2; and co-founder of PayPal.

If completed, Tesla would be the world’s only vertically integrated energy company offering end-to-end clean energy products to our customers and expand its addressable market further than either company could do separately.

The proposal by Tesla represents a value of $26.50 to $28.50 per share, or a premium of approximately 21% to 30% over the closing price of SolarCity’s shares.
The all-stock deal values SolarCity at up to $2.8 billion.

Tesla said in a statement announcing the deal:

“We would be able to maximize and build on the core competencies of each company. Tesla’s experience in design, engineering, and manufacturing should help continue to advance solar panel technology, including by making solar panels add to the look of your home. Similarly, SolarCity’s wide network of sales and distribution channels and expertise in offering customer-friendly financing products would significantly benefit Tesla and its customers.

“We would be able to provide the best possible installation service for all of our clean energy products. SolarCity is the best at installing solar panel systems, and that expertise translates seamlessly to the installation of Powerwalls and charging systems for Tesla vehicles.

“Culturally, this is a great fit. Both companies are driven by a mission of sustainability, innovation, and overcoming any challenges that stand in the way of progress.”

Tesla said the deal is subject to approval of “a majority of disinterested stockholders” of both companies.

“You should know that the board and the shareholders will be considering this, and so while I am personally excited, I will be recusing myself from the decision-making process,” SolarCity Chief Executive Lyndon Rive said in a letter to employees. “Ultimately, the shareholders will decide.”

Shares in Tesla dropped by about 11 percent in late trading after the deal was announced.

Karl Brauer, a senior analyst at Kelley Blue Book, was quoted by CNN as saying:

“It’s the ultimate renewable energy dream… It makes a lot of sense for them to be combined as a single company.”

However, he added that it’s unusual for two companies without profitable histories to merge.

“It’s like the country that’s been broke forever and never made any money trying to annex another country,” Brauer said. “Shouldn’t somebody be annexing you?”