Dive Brief:
- Tesla Motors Inc. announced Monday it had reached a price to buy SolarCity Corp., the nation's largest rooftop solar installer, for $2.6 billion.
- Under the all-stock deal, SolarCity shareholders would receive 0.11 shares of Tesla for each SolarCity share, valuing them at $25.83 apiece, according to Friday's closing prices.
- The agreement also includes a 45-day "go-shop" period, during which SolarCity may solicit offers from other companies. Tesla expects a shareholder vote after that period ends on Sept. 14, with the deal closing in the fourth quarter of the year.
Dive Insight:
When Telsa CEO Elon Musk announced in late June that he would try to buy SolarCity, headed by his cousin Lyndon Rive, the strategy seemed more thought-out than the deal itself.
In a press call, Musk laid out a new-look Tesla that would combine stationary solar and storage with electric transport, all in a one-stop shop.
“You’d walk into the Tesla store and say: ‘I’d like a great solar solution with a battery and an electric car,’ and in five minutes you’re done,” Musk said. “It’s completely painless, seamless, easy and that’s what the customer wants.”
But if the store floorplan was set, the structure of the deal was less so.
At the time, Musk outlined an agreement to trade 0.122-0.131 shares of Tesla stock for every share of SolarCity stock, valuing the deal from $2.5-$3 billion, depending on the final price of the shares. In the final agreement, the ratio is smaller, with 0.11 Tesla shares going for each of SolarCity.
The difference may be due to gains in SolarCity shares since the deal was announced. Musk's original range represented a value of $26.50-$28.50 per share of SolarCity stock, or a 21%-30% over the closing price ($21.19) of SolarCity on June 21, before the deal was announced.
But since the deal was announced, SolarCity's stock has rose steadily, peaking above $27 a share last week.
SolarCity's debt load from its reliance on net metering policies to fuel installation growth stoked some fears among Tesla shareholders, precipitating a sudden drop in its stock. Tesla shares valued nearly $220 on June 21 dipped to $193 on June 24. But the stock has since recovered, reaching above $234 last week.
SolarCity stocks were down in pre-market trading Monday, after edging higher on rumors of a final deal over the weekend. Tesla shares edged higher ahead of the bell.
