tesla, earnings

Another huge acquisition news has been confirmed and out in the world!! Ending months of speculations, the electric automotive company Tesla Motors, run by the legendary Elon Musk has finally acquired the solar panel installation company SolarCity for $2.6 billion in an all-stock deal.

Just over a month ago, Tesla had put forth its proposal to acquire SolarCity and the importance of the same had been emphasized in Musk’s Second Masterplan. And now it seems that the committee that had been formed to evaluate the aforementioned proposal also saw the upside in this partnership and has reached a positive conclusion.

SolarCity has been acquired by Tesla!!

The all-stock transaction has been tagged with an equity value of $2.6 billion(very close to the speculated $2.8 billion), based on the 5-day volume-weighted average price of Tesla shares at end of trading day on friday. The acquisition deal has been approved by the board of directors of both the companies.

Under the acquisition agreement, every shareholder will receive 0.110 Tesla common shares per SolarCity share. This deal values the SolarCity stock at $25.37 per share.

The two companies will now combine its innovative technologies to create the world’s only vertically integrated sustainable energy company. And this is a huge feat for Tesla, as it can now finally realize its dream for developing a connected transportation system, including cars, buses and even trucks.

The company has recently also inaugurated its extensively huge and massive ‘Gigafactory‘ in the middle of a desert in Nevada. The factory will help the company expand its battery and storage capacities. And even though it’s just 14% complete, it is capable of producing over 35 gigawatt hours of batteries by 2018.

The official blogpost further adds that,

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 acquiring SolarCity, the electric car company will now be able to operate more efficiently and fully integrate its solutions into their own products, specially the battery storage.

This acquisition gives Musk the confidence that his second masterplan is on right track and the company is now capable of building an aesthetically beautiful and simple one-stop solar + storage solution. The second masterplan details this solution where-in the Tesla customer will have a solar-panelled roof which will charge a Tesla battery residing in his garage —  a fully-integrated sustainable solution.

Tesla further expects to achieve cost synergies of $150 million in the first full year, after closing this deal. It also expects to benefit the customers by lowering hardware cost, reducing installation costs, improving manufacturing efficiency and reducing customer acquisition costs as well. Tesla also believes that it will be able to leverage its international presence and network of offline retails stores to extend the combined reach of the integrated solutions.

This is huge news for Tesla, but there’s a part of the agreement which says that SolarCity has a 45-day period known as a “go-shop” to receive solicit alternative proposals for its acquisition. So, we also have to keep a look-out for intruders in this match-made-in-heaven sort-of acquisition. Each company has also filed a Form 8-K with the SEC that provides additional details regarding the transaction.

This is a big step contributing towards the beginnings of a Mega Musk Empire. After receiving approval from a majority of disinterested shareholders of both Tesla and SolarCity, the transaction is expected to close by the fourth quarter of 2016.

Post the closing of this transaction, the two can work to create a fully-integrated residential, commercial and grid-scale products that will improve how solar energy is generated, stored and consumed. This news is already giving me the chills and getting me excited for future of Tesla Motors.

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