Tesla announced it has reached an agreement with SolarCity by which the two companies will combine. In a press release Monday morning, Tesla called the new company the “world’s only vertically integrated sustainable energy company”.
The deal will be an all-stock transaction, with an equity value of $2.6 billion. 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.
As part of the agreement, SolarCity will have a 45-day period known as a "go-shop", which will expire on September 14. During this time, SolarCity will be allowed to solicit alternative proposals. Both companies have filed Form 8-K with the SEC that provides additional details regarding the transaction.
Now is the right time to bring the two entities together, the companies said, since Tesla is preparing to scale its Powerwall Powerpack stationary storage products and SolarCity is getting ready to offer next-generation differentiated solar solutions.
“Solar and storage are at their best when they're combined,” Tesla continued. “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.”
The companies expect to achieve cost synergies of $150 million in the first full year after closing. They also expect to lower hardware costs, reduce installation fees, and improve manufacturing efficiencies.
The transaction will close in the fourth quarter of 2016. Before that time, the deal must be approved by a majority of the disinterested shareholders of both Tesla and SolarCity voting at each shareholder meeting. The deal will also require regulatory approval.