Tesla makes offer to buy Elon Musk-backed SolarCity

by Colin Lecher

Jun 21, 2016, 9:24 PM UTC

Tesla is making a bid to acquire sustainable energy company SolarCity, Tesla announced today.

"I think it's kind of an obvious thing to do," Musk said about the deal.

“We are pleased to submit to you and the SolarCity board of directors a proposal to acquire all of the outstanding shares of common stock of SolarCity in exchange for Tesla common shares,” the company wrote in a letter announcing the proposed deal. Rather than paying cash, Tesla is offering a stock-swap deal at a premium of about 21 to 30 percent over the price of SolarCity’s shares. The deal values SolarCity at up to $2.8 billion.

Tesla has previously partnered with SolarCity on energy-related business, and Elon Musk was a co-founder of the energy company, which is run by his cousin. Musk is also Chairman of the SolarCity board, and the largest shareholder of both companies. SolarCity is not profitable as of its most recent earnings report, but hopes to be by the end of the year. It has more than $3 billion in debt.

In a conference call with reporters, Musk called the proposed deal “an incredibly compelling solution,” and outlined his plan should the deal go through: eventually, SolarCity products would be offered under the Tesla brand, and customers will be able to purchase them in Tesla stores.

Tesla has shown increasing interest in the energy business. In May of last year, the company announced Tesla Energy, a program that offered battery systems to homes and businesses. The company has also been working to fully open its ambitious Gigafactory battery plant — and has a set plan for a grand opening next month — creating more overlap between the two companies. Both could use batteries produced by the factory, Musk said in one instance of how the deal could work.

Shareholders still need to vote on the deal, but it's unclear when they will

Musk said “there are benefits to sharing knowledge on the manufacturing front,” but the deal would otherwise not affect manufacturing plans.

“I think it’s kind of an obvious thing to do,” he said of the deal.

SolarCity and Tesla shareholders apart from Musk will still need to vote on the deal. Musk said a due diligence process will first take place, but the timing of the deal remains unclear.