Tesla to Purchase Solar City

American-based electric vehicle manufacturer Tesla Motors recently announced its plans to purchase solar panel manufacturer SolarCity for $2.6 billion. The deal, which was originally proposed back in June, exemplifies Tesla’s attempt to expand its reach as not only an EV and autonomous driving software developer, but also as a clean energy manufacturer.

tesla“Just over a month ago, Tesla made a proposal to purchase SolarCity and today we are announcing that the two companies have reached an agreement to combine, creating the world’s only vertically integrated sustainable energy company,” reads the announcement published on Tesla’s website, authored by “The Tesla Team”.

“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.”

Elon Musk currently owns 22% of SolarCity; he founded the company and sits on the renewable energy firm’s board of directors. SolarCity’s chief executive, Lyndon Rive, is Elon Musk’s cousin.

“Now is the right time to bring our two companies together,” explains the Tesla Team. “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.”

The deal between SolarCity and Tesla allows for the solar panel company to solicit offers from other potential buyers until September 14th, so until that date the deal will not be fully official.

tesla2According to the announcement on Tesla’s website, “Solar and storage are at their best when they’re combined.” While many have criticized a marriage between two companies that have yet to make a profit, Musk described the deal as a “no brainer,” asserting that it could turn Tesla into the “world’s only vertically integrated energy company offering end-to-end clean energy products.”

Financier Jim Chanos publicly criticized the deal, calling it a “shameful example of corporate governance at its worst.” His negative views of the deal are widely shared by many industry experts, whose opinions have led to a considerable fall in the stock values of both companies.

That said, Tesla is not discouraged by the nay-sayers:

“We expect to achieve cost synergies of $150 million in the first full year after closing. 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 Tesla Team claimed to have done ample research on the deal and cited its sources:

“After comprehensive due diligence in consultation with independent financial and legal advisors, the independent members of the Tesla and SolarCity boards of directors approved their transaction. Tesla’s financial advisor was Evercore and Wachtell, Lipton, Rosen & Katz was its legal advisor. The financial advisor committee of SolarCity’s board of directors was Lazard and its legal advisor was Skadden, Arps, Slate, Meagher & Florm.

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