Distributed Energy Resources, Energy Efficiency, Distributed Generation, Solar  -  August 1, 2016

Tesla, SolarCity close in on $2.6 billion deal

Tesla Motors Inc. and SolarCity Corp. have hammered out the details of a purchase agreement that will result in a union of Elon Musk's electric-car and solar-power businesses, The Wall Street Journal reported Aug. 1.

In the all-stock deal, which values SolarCity at roughly $2.6 billion, shareholders of the solar-energy company will receive 0.11 Tesla share for each SolarCity share they hold. The $25.83 value assigned to the SolarCity shares, based on their July 29 closing price, comes in below the originally contemplated range of $26.50 to $28.50.

As part of his vision for the new company, Musk said in a strategy document that he expects to sell electric cars and solar solar-energy systems under one roof. With the combined operations, the new company could trim expenses by as much as $150 million in its first full year, though Musk said he is confident in exceeding that target, according to the report.

The primary advantage of the deal would be leveraging Tesla's brand recognition to reduce the cost of finding customers for the solar-panel business. SolarCity's new customer cost leaped 80% quarter-over-quarter in the first three months of 2016, with more than 30% of the total cost of a home installation project for the solar systems funneled toward customer acquisition.

However, the new company, which would combine transportation with solar and storage operations, does not come without risk: Both Tesla and SolarCity rely on debt to fund their respective businesses, and the combined entity presents risks as well as opportunities, the Journal reported.

If approved, the deal would see Tesla's workforce jump to almost 30,000, roughly double its current payroll. The merger is expected to close in the fourth quarter, following a 45-day "go-shop" period for SolarCity.

Editor's note: This article was amended on Aug. 2 to correct the deal value, $2.6 billion, in the headline. 

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