Tesla, Solar City Agree To A $2.6 Billion Merger | TechTree.com

Tesla, Solar City Agree To A $2.6 Billion Merger

Elon Musk consolidates his brands into one mega green company that sells from solar batteries to battery-powered cars and everything in-between.

 

After more than two months of concerted debate over the wisdom of creating a giant green company, Tesla formally announced last night that it would acquire SolarCity for USD 2.6 billion, thus uniting two Elon Musk companies into a single monolith that sells everything from solar panels to batteries and auto-driving green cars.

Of course, the decision to formally unite comes on the back of several years of collaborative effort between Tesla and SolarCity, the latter founded by Musk’s cousins Lyndon and Peter Rive. The South Africa-born Canadian American Musk has held the position of Chairman for both companies, besides being their largest shareholder.

Though the deal hasn’t come as a surprise to many, Musk will have his task cut out while persuading the shareholders of both companies that the deal will boost revenues and drive shareholder value northward.

A report published in the New York Times says that this transaction needs majority shareholder approval from both companies. “Completion of the deal may come down to whether enough investors have the patience to accept the near-term headaches while waiting for Musk’s long-term vision,” the article says.

And what is this big idea? Quite simply to store the power generated by SolarCity’s panels in Tesla’s batteries, thus bolstering use of solar energy and reducing reliance on fossil fuel across the world. While analysts are wary about how long such an idea would take to fruition and investors aren’t exactly holding on to their horses either.

On his part, Musk is quite clear that the merger was critical to fulfill his vision. “This is really all part of solving the sustainable energy problem,” is how he described the rationale behind the acquisition during a call with analysts post the announcement, the NY Times report said.

In a related report published on CNBC.com, Musk is quoted as saying that the idea behind the acquisition is that “there is one sales process, one installation process, one service contract, one phone app to monitor things.” However, what he doesn’t explain is how the company plans to overcome challenges related to ramping up production in the years to come.

Of course, there are those who argue that Tesla’s current offer only represents about half the value that SolarCity boasted of twelve months ago. The decline obviously is a result of the company’s slowing growth and complex financial structure and increased scrutiny of government subsidies for solar rooftop panels.

So, when Tesla comes to its rescue, tongues are bound to wag, given that both entities are majority owned by Musk himself. To the naysayers, it appears as though Tesla is lending an olive branch to SolarCity. For the rest of the world, such a deal promises economies of scale in electrical energy management systems, battery manufacture and marketing.

Whatever be the case, Musk appears keen to make a difference to the state of sustainable energy. In the process, whether he makes money or loses it is something that only time can tell. 


TAGS: Tesla, Solar City

 
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