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%.