US electric carmaker Tesla Motors Inc (NASDAQ:TSLA) is proposing to acquire SolarCity (NASDAQ:SCTY) to create “the world’s only vertically integrated energy company offering end-to-end clean energy products”.
In a document dated June 20, Tesla’s board proposes to acquire all of the US solar energy company in exchange for Tesla stock. It is proposing an exchange ratio of 0.122x to 0.131x shares of Tesla common stock for every SolarCity common stock. This translates into USD 26.50-28.50 (EUR 23.5-25.3) per SolarCity share, or a premium of 21% to 30% over the closing price of SolarCity’s shares, based on the target’s closing price on the day of the offer and the five-day volume weighted average price of Tesla shares.
The proposal is subject to the completion of due diligence, the negotiation of mutually agreeable definitive transaction documents, and final approval by the Tesla board. Tesla does not anticipate significant regulatory or other obstacles in consummating such a transaction promptly.
Elon Musk and Antonio Gracias, who hold director positions in both companies, have recused themselves from voting on the acquisition proposal at the Tesla board meeting at which it was given the green light. They will also recuse themselves from voting on the proposal at the SolarCity board.
In addition, Tesla’s board said it is ready to make the consummation of the transaction subject to the approval of a majority of disinterested stockholders of both SolarCity and Tesla voting on the transaction.
Tesla expects multiple opportunities for product, service and operational synergies from the transaction. Together, Tesla and SolarCity will be able to expand their addressable market further than either could do on its own, the carmaker said. Tesla’s design, engineering, and manufacturing experience would help advance further solar panel technology, while SolarCity’s network of sales and distribution channels in the residential, commercial and industrial markets and expertise in customer-friendly financing would benefit Tesla and its customers.
“Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently, but they still need access to the most sustainable energy source that’s available: the sun.”