Tesla bids $3B for SolarCity.
Move would consolidate SolarCity, motor company under CEO Elon Musk
PALO ALTO — Tesla Motors on Tuesday offered a bid of up to $3 billion in stock to acquire SolarCity, a move that would consolidate two greenenergy tech companies under Tesla CEO Elon Musk.
The bid would also bring SolarCity under the Tesla brand and completely into the family fold. Musk serves as chairman of SolarCity, which is run by his cousins — CEO Lyndon Rive and chief technology officer Peter Rive. The proposal is subject to approval by stockholders of both companies.
“This is something we’ve been thinking about and debating for many years,” Musk said. The two companies will be able to deliver an integrated line of green-tech products to
businesses and consumers: solar panels, battery storage and electric vehicles. “We think it makes sense.”
SolarCity stock jumped about 15 percent in afterhours training, while Tesla dipped about 12 percent after the news was announced Tuesday afternoon. Tesla valued the company at between $26.50 to $28.50 per share, a markup of between 21 to 30 percent based on recent share prices. SolarCity designs, installs and provides financing for commercial and residential solar power systems.
Ravi Manghani, director of energy storage at GTM Research, said the proposal came as a surprise, but the companies have been very close. For example, Musk and private equity investor Antonio Gracias serve on both companies’ boards.
“It’s just a natural extension,” said Manghani. Both businesses have strong brand recognition, he said, and can benefit by producing an integrated line of products.
Manghani added that the timing is also good — SolarCity share prices have dropped as the company struggled to meet analysts’ expectations. Regulators in several states have also cut subsidies for rooftop solar.
Musk said combining the companies would make them more efficient, especially through sharing manufacturing knowledge and experience. The deal would have no effect on major projects, he said, including the construction of the Gigafactory, a lithium-ion battery manufacturing facility in Nevada, the launch of new electric vehicles or SolarCity manufacturing.
It would also move Tesla toward becoming the only fully integrated sustainable energy business, the company said. Tesla brings its design, engineering and manufacturing expertise, while SolarCity contributes a network of sales and distribution that could help the electric vehicle maker expand its market.
“The world does not lack for automotive companies,” Musk said. “The world lacks for sustainable energy companies.”
He also downplayed the effect the purchase would have on Tesla’s finances. “We don’t see this as adding significant leverage to the Tesla balance sheet,” he said. Musk said he and Gracias will recuse themselves from voting on the proposal in board meetings.
Rive also said in a company email that he would also stay out of the decision-making process, although he’s excited about a potential deal. “There are tremendous synergies between these two companies,” he said.
Rive struck on the idea for SolarCity during a discussion with Musk in 2004 during an RV trip to the Burning Man gathering in Nevada. Based in San Mateo, SolarCity employs about 13,000 employees.
Tesla has embarked on an aggressive expansion plan. In March, the electric vehicle maker unveiled its Model 3 sedan, a lower-cost alternative to its luxury Model S. The company took nearly 400,000 reservations for the vehicle in the weeks following the announcement.