Tesla (TSLA), SolarCity (SCTY) Announce $2.6 Billion Merger

UPDATE: 5:54 p.m. EDT — Tesla Motors Inc. and SolarCity Corp. confirmed their merger Monday after the latter agreed to the electric car maker’s $2.6 billion offer — about half of the solar panel installer’s value last year.

The final offer stood at $25.37 a share, $200 million less than the initial proposal of about $2.8 billion that Tesla CEO Elon Musk had outlined in June.

As the deal was finalized, shares of both companies took a hit. Tesla was down by 2.04 percent in after-hours trading while SolarCity saw a dip of 7.42 percent, indicating uncertainty among shareholders.

Original story:

Troubled electric car maker Tesla Motors, Inc. and solar panel installer SolarCity Corp. are expected to announce a merger Monday, people familiar with the matter told Reuters. The step is in line with Tesla founder and billionaire Elon Musk’s master plan “part deux” released last month that aims at offering its consumers a source of hardware to power a low-carbon lifestyle through the merger.

Along with his position as the chief executive of Tesla, Musk is also the chairman of SolarCity and holds the maximum amount of shares in both entities. However, SolarCity formed a special committee to review the electric car maker’s offer away from Musk’s influence.

Under the deal, SolarCity may continue to court offers from competing companies for a short period of time even after the merger has been signed — popularly referred to as a ‘go-shop’ provision — which could possibly benefit SolarCity in increasing the price from the original offer of about $2.8 billion in an all-stock transaction announced by Tesla last month.

The deal would see SolarCity shares convert to Tesla shares at a ratio of 0.122 to 0.131. SolarCity, a prominent name in California’s residential solar panel market since 2007, has a market capitalization of $2.6 billion compared to Tesla’s $34.6 billion.

Musk and his cousins, SolarCity CEO Lyndon Rive and board member Peter Rive, along with a number of Tesla and SolarCity executives have reportedly recused themselves from voting when the deal comes up for vote.

Musk has made the case for the merger repeatedly, arguing that by installing solar panels on their roofs, consumers will be able to send power to Tesla storage batteries — from the company’s $5 billion Gigafactory in Nevada — and cars in their homes.

Tesla has been under fire after the U.S. National Highway Traffic Safety Administration disclosed that it was investigating a fatal accident involving the Tesla Model S whose drive was using the car’s Autopilot system. However, Tesla told members of the Senate Commerce Committee last Thursday that a problem with the automatic braking system of its Model S car could have been responsible for the crash. This system is “separate and distinct” from the Autopilot.

Last month, the company announced that its deliveries for the quarter had fallen short of its forecasts. Its second-quarter results are scheduled to be released on Aug. 3.