Tesla’s proposed acquisition of SolarCity has taken a major step forward, after the electric vehicle giant today announced the two companies have agreed to the $2.6bn share-based takeover deal.
In a statement on its website, Tesla confirmed that just over a month after its initial bid the companies’ boards have agreed to join forces to create “the world’s only vertically integrated sustainable energy company”.
“Solar and storage are at their best when they’re combined,” the statement reads. “As one company, Tesla (storage) and SolarCity (solar) can create fully integrated residential, commercial and grid-scale products that improve the way that energy is generated, stored and consumed.”
The company also reiterated its plans to use the merger to create a ‘one-stop-shop’ for electric vehicles, renewable energy, and energy storage technologies.
“Now is the right time to bring our two companies together: Tesla is getting ready to scale our Powerwall and Powerpack stationary storage products and SolarCity is getting ready to offer next-generation differentiated solar solutions,” Tesla said. “By joining forces, we can operate more efficiently and fully integrate our products, while providing customers with an aesthetically beautiful and simple one-stop solar + storage experience: one installation, one service contract, one phone app.”
The company added that the deal would deliver cost savings of $150m during the first full year after the acquisition is completed and predicted it would also reduce hardware, installation and purchase costs for customers.
Under the terms of the agreement, SolarCity stockholders will receive 0.110 Tesla common shares per SolarCity share, valuing SolarCity common stock at $25.37 per share based on the five-day volume weighted average price of Tesla shares up to last Friday. Consequently, the deal is worth $2.6bn.
The companies said the agreement had been brokered following a comprehensive due diligence process in consultation with independent financial and legal advisors. They added that the deal had been approved by the independent members of the Tesla and SolarCity boards.
Tesla chief executive and founder Elon Musk, who is also a major shareholder and board member at SolarCity, has recused himself from voting his shares, along with several other board members with ties to both firms.
Moreover, the deal was backed by a special committee at SolarCity, appointed to independently assess the offer and explore alternative strategic options.
The deal has faced criticism from some analysts, who have argued the merger could distract Tesla from the daunting task of rapidly scaling up its production capacity to meet soaring demand for its new electric vehicles.
The agreement marks a major step towards finalising the deal, but it still requires regulatory approval as well as approval from a majority of disinterested shareholders at both Tesla and SolarCity.In addition, SolarCity now has to undergo a 45-day period known as a “go-shop”, during which it is allowed to solicit alternative proposals.
However, Tesla predicted the acquisition would complete during the fourth quarter of the year.Musk has hailed the deal as a major component of the company’s new Master Plan, which was unveiled last month detailing plans to branch out into renewable energy provision at the same time as expanding Tesla’s vehicle line to include trucks, public transport, and self-driving taxi fleets.