Electric car maker Tesla Motors Inc wants to buy solar panel maker SolarCity Corp for up to US$2.8 billion in an attempt to create a one-stop shop for cleaner energy as consumers become more concerned about fossil fuels harming the environment.
The all-stock bid announced on Tuesday values SolarCity at US$26.50 to US$28.50 per share, depending on a review of the company’s books.
SolarCity’s stock surged US$3.31, or 16 percent, to US$24.50 in after-hours trading following the announcement of the deal.
Photo: Reuters
Tesla’s shares sank US$24.86, or 11 percent, to US$194.75, signaling that many investors do not like the idea of the company relinquishing 8 to 9 percent of its current market value of US$32 billion to expand into the solar energy industry.
Both companies, located about 27km apart in Silicon Valley, are burning through cash as they try to expand in still relatively small markets. Tesla has lost US$1.2 billion in the past two years alone, while SolarCity has suffered losses exceeding US$1.1 billion during the same span.
Yet both have fared well in the stock market, particularly Tesla. That is largely because CEO Elon Musk has been widely viewed as a visionary since he cofounded online payment service PayPal.
Now, the 44-year-old Musk is trying to bring two of his progeny together. He is chairman of both companies and the largest individual shareholder in each, with a 26 percent stake in Tesla and a 22 percent stake in SolarCity. The solar panel company’s CEO, Lyndon Rive, is Musk’s cousin.
Tesla is pursuing SolarCity 14 months after introducing a battery system that stores solar energy in homes and businesses trying to minimize their dependence on the power grids run by utilities. The battery, called “Powerwall,” marked Tesla’s first product outside the sleek and expensive electric vehicles that the Palo Alto, California, company has been making since 2008.
Musk said in a Tuesday conference call that he believes both Tesla and SolarCity would be better off if their products are united under one roof and a common brand.
If the deal goes through, SolarCity would adopt Tesla’s name and sell its solar panels alongside power-storing batteries, Musk said.
He said that many of the people who want to drive electric vehicles would have an inherent interest in setting up cleaner energy systems in their homes and offices.
Although he said he did not know for certain, Musk estimated about only about one-quarter of Tesla owners currently have solar energy panels.
If Tesla and SolarCity are combined, Musk envisions a more efficient operation that dispatches just one team to install solar panels, electric car chargers and energy-storing batteries in a single visit.
The sell-off in Tesla’s stock after the takeover bid was announced cost Musk about US$925 million on paper, exceeding the US$325 million gain in the value of his SolarCity holdings.
Nonetheless, he expressed confidence that Tesla would end up owning SolarCity.
“This is something that should happen,” he said. “It’s a no-brainer.”
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