Tesla wagers on renewable energy, to acquire SolarCity for $2.6 billion

Elon Musk’s Tesla Motors Inc. has acquired solar panel installer SolarCity for USD 2.6 billion.

Tesla to acquire SolarCity in an all-stock transaction, under 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 5-day volume weighted average price of Tesla shares as of July 29, 2016.

The agreement also includes a 45-day go-shop period during which SolarCity may solicit alternative acquisition proposals.

Tesla seeks to accelerate the world’s transition to sustainable transportation by offering increasingly affordable electric vehicles. Last year in March the company launched Tesla Energy, which through the Powerwall and Powerpack allow homeowners, business owners and utilities to benefit from renewable energy storage.

SolarCity in its blog said “Just over a month ago,Tesla made a proposal to purchase SolarCity and today we are announcing that the two companies have reached an agreement to combine, creating the world’s only vertically integrated sustainable energy company.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.

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. 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.

We expect to achieve cost synergies of $150 million in the first full year after closing. We also expect to save customers money by lowering hardware costs, reducing installation costs, improving our manufacturing efficiency and reducing our customer acquisition costs. We will also be able to leverage Tesla’s 190-store retail network and international presence to extend our combined reach.”

The transaction is expected to close in the fourth quarter of 2016. The transaction will be submitted to the stockholders of each of SolarCity and Tesla for their consideration. Tesla will file with the SEC a Registration Statement on Form S-4 that will include a joint proxy statement/prospectus of SolarCity and Tesla.