Tesla makes ~$2.8B all-stock offer to acquire SolarCity
21 June 2016
Tesla Motora has made an all-stock offer worth approximately $2.8B to acquire all of the outstanding shares of solar energy provider SolarCity. Subject to completing due diligence, Tesla is proposing an exchange ratio of 0.122x to 0.131x shares of Tesla common stock for each share of SolarCity common stock. This proposal represents a value of $26.50 to $28.50 per share, or a premium of approximately 21% to 30% over the recent closing price of SolarCity’s shares.
Tesla Chairman and CEO Elon Musk is also Chairman of SolarCity; Antonio Gracias, CEO of investor Valor Management Corp., is on both Tesla and SolarCity boards. Musk and Gracias recused themselves from voting on the proposed acquisition at the Tesla Board meeting, and will recuse themselves from the SolarCity Board meeting which will consider the offer.
In a blog post, Tesla management said that:
Tesla’s mission has always been tied to sustainability. We seek to accelerate the world’s transition to sustainable transportation by offering increasingly affordable electric vehicles. And in March 2015, we launched Tesla Energy, which through the Powerwall and Powerpack allow homeowners, business owners and utilities to benefit from renewable energy storage.
It’s now time to complete the picture. Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently, but they still need access to the most sustainable energy source that’s available: the sun.
The SolarCity team has built its company into the clear solar industry leader in the residential, commercial and industrial markets, with significant scale and growing customer penetration. They have made it easy for customers to switch to clean energy while still providing the best customer experience. We’ve seen this all firsthand through our partnership with SolarCity on a variety of use cases, including those where SolarCity uses Tesla battery packs as part of its solar projects.
More succinctly, Musk noted in a conference call that Telsa had considered the deal “blindingly obvious” for awhile.
A combination of Tesla and SolarCity would create the first vertically integrated energy company offering end-to-end clean energy products to its customers: Tesla EVs, solar panel systems, and home energy storage Powerwall system.
Tesla management also suggested a number of other synergies, including Tesla’s experience in design, engineering, and manufacturing to help continue to advance solar panel technology, including aesthetics. SolarCity’s wide network of sales and distribution channels and expertise in offering financing products would significantly benefit Tesla and its customers, management observed.
SolarCity shares jumped some 15% in after-hours trading following the news, while Tesla shares dropped as much as 10%.
The idea of going into a Tesla showroom and get help on ordering a complete package that will enable you to get zero emission transportation and also to get a zero emission power plant on the roof of your house is a compelling constellation. Tesla’s already strong brand will become synonymous with sustainable living which will make it an even stronger brand. Buying a solar PV power plant for your house with back-up batteries is a complicated affair and you do not want to buy such a product from a week brand that you have little knowledge of or trust in. So I think it makes sense for Tesla and Solarcity to merge so that it becomes a company that under a single Tesla brand offers sustainable lifestyles with respect to energy and transportation.
I believe Musk has previously talked about manufacturing PV cells and panels but only when they have a plan for doing it on an unprecedented large scale in order to gain a cost advantage to other PV cell and panel makers. Today the worlds largest PV factories are at 1 Gw cells or panels per year so Musk will probable not make such a factory until he thinks he has a distribution system in place that can handle the output of a 10 Gwatt per year integrated, cell and panel factory.
Meanwhile the old auto-industry keep lobbying for regulations that will enable them to keep producing cars that are grossly unsafe to drive killing 1.2 million people per year globally and also causes millions more to die prematurely every year from lifelong inhalation of dangerous vehicle exhaust gasses.
Posted by: Account Deleted | 22 June 2016 at 12:38 AM
Musk can never resist slipping in a lie.
'We would be the world's only vertically integrated energy company offering end-to-end clean energy products to our customers.'
BYD currently has up and running some of the biggest operations in the world in:
Solar panel production:
Solar City are simply trying to build one in Buffalo.
BYD has been in operation for years.
BYD had 10GWh of production for everything from cars to hand tools and stationary storage up and running at the start of this year and will add 6Gwh more this year.
Tesla is yet to turn out its first cell in Nevada.
EV car production.
BYD produces both BEVs and PHEV, and BEV buses and all sorts of electric utility vehicles too.
Tesla only produces BEVs, no PHEVs, no buses, no utility vehicles.
BYD operates at a profit.
Musk is sticking two massively loss making businesses together to stop Solar City going down the drain and prevent a margin call.
Investors in the last capital rise at Tesla will be thrilled that no mention was made of this prospective acquisition a month or so ago, and that their shares are now going to be substantially diluted still more.
Posted by: Davemart | 22 June 2016 at 03:44 AM
Tesla losses last year around $2 billion.
Not good enough, so buying Solar City, losses last year around $2.8 billion.
Can the combined 'enterprise' crack the magic $5 billion a year losses this year?
Its a growth stock.
Posted by: Davemart | 22 June 2016 at 03:54 AM
"Meanwhile the old ___ keep lobbying for regulations that will enable them to keep producing ___ that are grossly unsafe to [use] killing (over)1.2 million people per year globally and also causes millions more to die prematurely every year from lifelong inhalation of dangerous ____"
Henrik, for a while, the above sounded like my US medical mafia healthcare - all three Medical parts, Medigap part, dental insurance, six months and no insurance payments, ...
Posted by: Kellydorsey8 | 22 June 2016 at 03:56 AM
I'm a Tesla stock holder of modest 250 shares bought at $185 each with hardly earn personal money at the beginning of this year, waiting for them to double in value to purchase my long waited Model X P100D ... when it finally comes out, hopefully later this year, funding it by 1/3 with the plus-value on these Tesla shares, if my plan works.... And despite the negative reaction of Wall street since yesterday, I think this merge makes extreme sense to both companies on the long term. Note that on the short term it may look better for the SolarCity stock holders, because of premium offered, but also because the huge expansion of solar and renewables supply connected to the Grid, that yet cant store much energy, has had as a consequence in many places, to push down the KWH electricity prices at low consumption hours, during the day when the sun shines but demand is low, down to zero or even negative values during some short periods of time in Germany recently, expanding to Western Europe via European Grids interconnection. Same in Latin America, especially Chili. And this is meant to expand in the future years as more renewable sources w/o appropriate storage get connected to the Grid. But for me this is only short term and due to the absence of energy storage in the grid. Overtime, as more storage will be available at several levels including the grid itself, and/or more EVs will be charged at work, on Supercharge on the road, during the day, providing some of that missing storage / extra consumption during the day, the real cost of energy will get smoothened through the day and the night, while at the time the sun shines the main customers of Solar energy and best energy storer will become the EVs charging at work place, or on the road charging at Tesla Superchargers... So a lot of value can be retained from that partnership by Tesla too, overtime. Tesla accessing potentially cheaper and cheaper energy source for their Superchargers, whose future costs are planned for many years hence not subject to electricity market spikes. SolarCity getting a captive "in-phase" long term key customer that will most need energy during the day, as people travel best during daylight hours, means when they roof produce power... So they could fully leverage their solar pannels investments with far less Storage capacity than other Solar power vendors will need, as they will access that secured Tesla Superchargers demand. Great move Elon again !!!!
I listen to the Pure-Player EV + Battery being diluted with Solar but this is building tomorrow world and bet it will be different so worth taking some risks, but the don't buy the Analysts comments about SolarCity debt. This is presented as that debt was not connected to secured future Revenues. For me the long term contracts with roof owners secure that debt for a part, plus now the merge with Tesla will secure a certain price for the electricity produced a low consumption hours, so good on the long term to both parties. Hence this should not be seen as a dangerous debt but as a secured investment in my view.
Then comments on the cash consumption are valid and need to be adressed with more profitable revenue covering their expenses on both sides.
Posted by: Patrick Free | 23 June 2016 at 06:00 AM
Sooner or latter, RE producers may/will push surplus/excess clean energy to BEV charging and H2 facilities at very low price. Could it go all the way to 'negative' for peak surplus periods? Why not?
Posted by: HarveyD | 23 June 2016 at 08:25 AM