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August 2, 2016

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Tesla acquires SolarCity at lower price of US$2.6b

SOLARCITY Corp agreed to be acquired by sister company Tesla Motors Inc in a deal worth US$200 million less than the initial offer of US$2.8 billion, sending shares of both companies down in early trading yesterday.

Electric vehicle maker Tesla expects to achieve “significant” cost savings and “dramatic improvements” in manufacturing efficiency as a result of the acquisition of solar panel installer SolarCity, Tesla CEO Elon Musk said yesterday.

Musk said the combined companies will have a “stronger balance sheet,” but likely will require a “small equity capital raise” next year. Both companies have been burning through cash and have projected achieving positive cash flow later this year.

Musk is the largest shareholder in both companies and is chairman of SolarCity. His cousins Lyndon Rive and Peter Rive are co-founders of SolarCity.

The two companies yesterday announced an agreement to merge, with Tesla holding 93.5 percent of the combined companies and SolarCity 6.5 percent. The deal is expected to win approval in the fourth quarter, the companies said.

The combined entity would sell solar panels, residential and commercial battery storage systems and electric vehicles under a single brand.

“Solar and storage are at their best when they’re combined,” the companies said in a blog post on Tesla’s website.

Musk unveiled an updated “master plan” last month, sketching out a vision of an integrated carbon-free energy enterprise, offering electric vehicles, car sharing and solar energy systems.

The deal includes a “go-shop” provision that allows SolarCity to solicit offers from other potential buyers for 45 days through September 14.

Up to Friday’s close, SolarCity’s stock had increased about 26 percent, valuing the company at US$2.62 billion, since Tesla first made an offer on June 21 that was valued at US$2.8 billion.

The companies said yesterday that SolarCity stockholders would receive 0.110 Tesla common shares for every share held.

The offer values SolarCity at US$25.37 per share, based on the five-day volume-weighted average price of Tesla shares as of Friday.

SolarCity had formed a special committee to review Tesla’s initial offer, which was pitched at 0.122 to 0.131 Tesla shares for each SolarCity share.


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