Tesla, SolarCity Merge In $2.6 Billion Transaction

Tyler Durden's picture

Concluding a transaction that surprised the world when it was announced one month ago, and which we hope the regulators are poring over as a result of a myriad of "related party transactions" and shared top shareholders...

... moments ago SolarCity (whose stock is currently halted) announced that Tesla and SolarCity would combine in all-stock deal; in which SCTY stockholders will receive 0.110 Tesla common shares per SCTY share, valuing SCTY common stock at $25.37 per share.

SCTY announced that "after comprehensive due diligence in consultation with independent financial and legal advisors, the independent members of the Tesla and SolarCity boards of directors approved this transaction", and added that it that expects to achieve cost synergies of $150 million in the first full year after closing.

SolarCity will now have a 45-day “go-shop” period, which runs through September 14, 2016. "This means that SolarCity is allowed to solicit alternative proposals during that time." It is assured that no overbid will emerge.

From the press release on SCTY's blog:

Tesla and SolarCity to Combine

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.

Solar and storage are at their best when they’re combined. 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.

Now is the right time to bring our two companies together: 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.

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.
Here are some key terms of today’s announcement: this is an all-stock transaction with an equity value of $2.6 billion based on the 5-day volume-weighted average price of Tesla shares as of July 29, 2016. Under the agreement, SolarCity stockholders will receive 0.110 Tesla common shares per SolarCity share, valuing SolarCity common stock at $25.37 per share based on the 5-day volume weighted average price of Tesla shares as of July 29, 2016. 

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

As part of the agreement, SolarCity has a 45-day period known as a “go-shop”, which runs through September 14, 2016. This means that SolarCity is allowed to solicit alternative proposals during that time. Each company today filed a Form 8-K with the SEC that provides additional details regarding the transaction.

While today’s news is a big step, it isn’t the finish line – we expect the transaction to close in the fourth quarter of 2016. Before then, the deal must be approved by a majority of the disinterested shareholders of both Tesla and SolarCity voting at each shareholder meeting. We also need to obtain regulatory approval and meet other closing conditions.

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de3de8's picture

The current golden boy gets what he wants

NoDebt's picture

Correct me if I'm wrong but... both of these companies are losing money, right?

 

Dormouse's picture

But if you duct tape enough shit together it becomes too big to fail.

knukles's picture

Well, somebody got screwed.

MalteseFalcon's picture

The "free market" gets screwed.

Mr. Universe's picture

I have a feeling the screwing has just begun.

Lorca's Novena's picture

That is hate speech! The new norm isnt about profits or solvency, its about eventually getting bailed out and pocketing That Money!

Or so i imagine...

BandGap's picture

Shit right out in the open.

Wonder if they double their government welfare payments going this route.

silverer's picture

There's no question now this is a "safe" investment, because judging by what I've seen, these guys will be propped up with taxpayer money until Hillary starts the next nuclear war.

DeadFred's picture

Most studies show that solar panels are EMP resistant so they're good even after the nukes start popping off!

overmedicatedundersexed's picture

self dealing is not a crime when the connected do it..Right mr elon?? if only he had gotten to bid on solyndra before it went bk..just think of the synergies

JusticeTBuford's picture

Why realease this info on a Monday morning?  //sarc

css1971's picture

This actually makes some sense. the only way to get solar panels to pay off in a reasonable timeframe is to use them to replace fuel costs.

Wahooo's picture

Yeah, they couldn't partner up for battery-backed solar energy without merging. ???

And what's the deal on the pricing? Solar closed at $26.70 on Friday, so they sell it for $25.37?

I don't understand.

Herd Redirection Committee's picture

SC had a big run/short squeeze after the deal was initially proposed.  From $20.10 to back in mid-May, to $26, $27+.  Just 'investors' front-running the deal.

Why do I feel like this will end in Tesla becoming a footnote in automotive history?

Mr. Universe's picture

A few months from now they will merge with Space X, then things will really take off! To the moon, Alice.

Dg4884's picture

That's like squeezing out two separate turds and they magically come together in the bowl. 

NoDebt's picture

... a turd so large it won't go down no matter how many times you flush.

knukles's picture

Now THAT is an analogy to which I can oersonally relate.

wmbz's picture

Your/our tax dollars hard at work!

Big Brother's picture

A financial transaction so incestual, it'd make a Habsberg blush.

peddling-fiction's picture

Zero conflicts of interest. /s

Paul John Smith's picture

"Circuit City" merger, great sign.

Catullus's picture

We're going to sell solar panels at retail locations in the mall!!!

 

spanish inquisition's picture

With all of teslas purchases and mergers, I had the thought of an updated version of a good old fashioned check kiting scheme.

Infield_Fly's picture
Infield_Fly (not verified) Aug 1, 2016 8:22 AM

Tesla would not exist without big fat fucking gummint handouts - gummint chooses the winner thanks to barry.

 

And in a few years, Tesla city won't exist because, like all other gummint backed schemes, it was never viable.

 

$80K for an induction motor, four wheels and suspension, body, interior and software that talks to your android.

 

Care for the $2500 car wash that goes with it???

Pigeon's picture

Solar City is just as big a govt-backed boondoggle.

Falling Down's picture

Like a drug addict marrying an alcoholic.

Pigeon's picture

I watched the Big Short last night. This is what happens when the rules are only for the "little people".

knukles's picture

Having lived through all that personally on the buy side, all I can tell youse guys is that the Big Short and Wolf of Wall Street are NOT exaggerations.
In the Big Short, the moment of purity is when the Brad Pitt character gets the 2 newbies to buy protection on the single A rated layers.

Magnificent non-consensus thinking.

 

"You're welcome"
  - Dr Berry

Pigeon's picture

I was a retail broker in the early 90's. Mid 90's was principal in a couple of online B/Ds. Witnessed the "Chinese Wall" was really nothing more than words - again, rules for little people. So when Glass-Steagall was being destroyed by Rubin/Clinton and their crony R's in the house, I knew it would end badly.  Not for the players. But for everyone who was stupid enough to believe that the SEC regulated and that institutions followed the rules.  For these people running banks/brokerage/funds, etc - there is NEVER enough money. They always want MOAR.

vesna's picture

Math says minus and minus multiplied gives plus. We do not multiply here, we sum, IDIOTS!!!!!! CROOOOOOKS!!!!!!!

Another prove Elon is full of shit. cocksucker!!!!!!!

Why don't you merge Moon and Earth and MArs. You would save money on your stupid space projects. Cocksucker!!!!

Bay Area Guy's picture

I'm waiting for the synergies that will be generated when this combined company merges with SpaceX.  The savings should be out of this world.

Pigeon's picture

You mean like being able to achieve gravitational escape velocity with solar panels rather than rocket fuel?  I hear ya... ;-)

bluskyes's picture

How much litium is this Tesla plant going to need?

_SILENCER's picture

Doesn't Elon own both companies? How does one merge with oneself?

I guess It's good to be connected.

Teslas are fun to drive, but they are not satisfying. My tuned German Seig-Heil death machine seeks meat on the road.  Supercharger whine is a thing of beauty.

Mrs. Silencer's Challenger makes lovely sounds when you push that Hemi. A Tesla won't do that. Ever.

shovelhead's picture

A new welfare kingdom is in the making.

Silicone Valley meets Detroit.

I'm looking forward to the success of this taxpayer funded venture. Ha.

SERReal1's picture

I smell Solyndra all over again.

A is A's picture

Ponzi/Ponzi singularity merge complete...

Pieter Bruegel the Elder's picture

0 + 0 = FORTUNE
CRIME + CRIME = LAW

Long memory man's picture

Tesla (Elon Musk, Larry Page, Nick Pritker, Sergei Brin & Steve Wesley) got $465,000,000 tax dollar injection.

Solar City (Elon Musk, Dan Reicher, Larry Page, Sergei Brin) got $ 275,000,000 tax dollar injection.

Both are cr*p investments, UNLESS you have tax payer handouts.

I cannot understand why anyone would hold these chaps up to being anything other than sandbaggers.

What new deal have they worked out with the White House & DNC for even more tax cash.

They are peeing on your dinner plates chaps.