Yesterday (June 21) Tesla Motors made a surprise move when it offered to purchase SolarCity. The up to $2.8 billion offer would represent a value of $26.50 to $28.50 per share, which Tesla said is a premium of approximately 21 percent to 30 percent higher than SolarCity’s closing price on June 21. If the purchase is made it would take Tesla further into the realm of being an energy company.
“This is something that we have been thinking about and debated for many years,” Musk said in a call with reporters Tuesday as recounted by The Wall Street Journal. “But the timing seemed to be right now.” Both companies are expanding their businesses to manufacture more of the equipment they use. In the case of SolarCity, it’s building a solar panel manufacturing facility and in the case of Tesla, it’s building a battery factory, which will power its cars and are being used as backup batteries for SolarCity’s home and business installations.
In a release announcing the proposed transaction Tesla wrote: “Tesla’s mission has always been tied to sustainability.” In addition to offering electric vehicles, the company launched Tesla Energy, which offers Powerwall and Powerpack battery storage systems for homeowners, business owners and utilities.
“We would be able to expand our addressable market further than either company could do separately. Because of the shared ideals of the companies and our customers, those who are interested in buying Tesla vehicles or Powerwalls are naturally interested in going solar, and the reverse is true as well,” Tesla said. “When brought together by the high foot traffic that is drawn to Tesla’s stores, everyone should benefit.”
If the acquisition is made Tesla said it 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.” SolarCity, in addition offering solar installations, is building a solar panel manufacturing facility, which would allow it become a vertically integrated solar company.
The acquisition also would bring cousins Lyndon Rive, CEO of SolarCity and Elon Musk, CEO of Tesla back together. There already are partnerships between the companies, Musk is the chair of SolarCity’s board and SolarCity already uses Tesla’s Powerwall.
A date for the proposed transaction has not been set and shareholders must choose whether or not to accept the offer. Musk also said he has recused himself for voting in the matter since he holds interests in both companies.Tweet