Tesla Confirms SolarCity Purchase

A posting on the Tesla blog dated August 1 confirms that Tesla and  SolarCity will join forces to become “the world’s only vertically integrated sustainable energy company.”

Tesla factory in Fremont

“Solar and storage are at their best when they’re combined. 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.”

All of this happy talk made investors nervous when the idea was first proposed a month ago, but the mood among investors seems to have brightened considerably since then. The strength of Elon Musk’s belief in the correctness of his vision has a way of sweeping away all opposition.

Tesla says the two companies can achieve cost reduction synergies of $150 million year by working together rather than separately. “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 deal includes a 45 day “go shop” provision that expires September 14. During that time, SolarCity is free to seek purchase offers from other companies in order to get a better price, if one is available.

The statement concludes with this admonition. “While today’s news is a big step, it isn’t the finish line — we expect the transaction to close in the fourth quarter of 2016. Before then, the deal must be approved by a majority of the disinterested shareholders of both Tesla and SolarCity voting at each shareholder meeting. We also need to obtain regulatory approval and meet other closing conditions.”

As one person commented online: “Oh, great. One company that is hemorrhaging money is going to solve is financial problems by buying another company that is hemorrhaging money.” Not everyone is a firm believer in the gospel according to Musk, but they tend to be in the minority.

Source: Tesla Blog

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.