Just over one month ago, California automaker Tesla Motors [NASDAQ:TSLA] announced its intention to acquire all remaining stock of solar panel installers SolarCity [NASDAQ:SCTY] for an estimated $2.8 billion. Part of Tesla’s plan to expand its reach far beyond the automotive world and become a ‘one stop shop’ for anyone wanting to ditch fossil fuels for good, the proposed deal would involve Tesla acquiring all remaining SCTY shares at an exchange ratio of 0.122x to 0.131x shares of Tesla common stock for each share of SolarCity common stock.
Following the announcement last month, there’s been a lot going on behind the scenes, with both Tesla and SolarCity working hard on their respective due diligence on the prospective deal. But as Reuters reported over the weekend, it appears that both companies are very close to finalizing the terms of the official acquisition deal that they will present to shareholders of both companies.
Citing anonymous sources close to the deal, the news agency said that while both sides are still in negotiation, it is expected that a final deal will be inked this week, which will then be voted upon by shareholders of both companies.
As a 21 percent major shareholder and CEO of Tesla and 22 percent major shareholder and Chairman of SolarCity, billionaire Elon Musk has recused himself from voting on the deal, as have several other Tesla and SolarCity executives. Among them are Lyndon Rive, CEO of SolarCity and his brother Peter Rive, who happens to be on the SolarCity board of directors. Both men also happen to be cousins to Elon Musk, another reason why they will not be voting on the deal.
Last week when revealing the second part of his grand ‘Master Plan’ for Tesla, Musk admitted that without gaining approval for the merger, his goal for Tesla (for it to offer customers everything from photovoltaic solar panels through to domestic energy storage products and long-range, zero emission electric cars) would not be possible. Should the deal not be approved, Tesla’s ultimate unwritten goal — to wean the world off fossil fuels forever — would also be far harder to achieve. But at the moment, while both Tesla and SolarCity’s respective boards of directors seem generally positive about the deal, not all of Tesla’s shareholders feel the same way.
Here at Transport Evolved, we’ve talked to Tesla shareholders who are in favor of the deal as well as those who are less keen about the prospect of Tesla and SolarCity becoming one. Both parties believe the merger could lead to great things for Tesla, creating a more streamlined process that lets customers order solar panels for their home, domestic off-grid or grid-tied storage and an electric car in one fell swoop. But while those in favor of the merger believe Tesla has what it takes to make that dream a reality, those who are not in favor of the merger worry that Tesla could leave itself too thinly spread and perhaps even jeopardize its place in the electric vehicle world by concentrating on too many things at once.
Others worry that SolarCity’s current financial situation will further stress Tesla’s own financial commitments, causing further hemorrhaging of cash at a time when Tesla needs all the financial stability it can to deliver on its promise that the Tesla Model 3 electric car will enter production on time and on-budget for the end of next year.
While we’ve encountered shareholders of TSLA and/or SCTY stock who are worried about the merger, the overwhelming majority do seem to welcome the deal, leading us to predict that the merger will be given the go-ahead by popular vote. That is assuming of course, that Tesla and SolarCity’s negotiations prove successful, which isn’t quite a foregone conclusion just yet.
Do you think Tesla and SolarCity should merge? Do you think that Tesla should be expanding its focus or concentrating on bringing cars like the Model 3 to market first? And what do you think the result of the deal will have on share prices and Tesla’s long term future?
Leave your thoughts in the Comments below.
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