Tesla has announced that it will merge with SolarCity, creating a 30,000-employee entity it claims will be “the world’s only vertically integrated sustainable energy company.”
The new company would see each shareholder of SolarCity receive 0.11 of a share in Tesla per SolarCity share, and would value SolarCity at $US 2.6 billion. According to Tesla, the deal is expected to close in the fourth quarter of 2016.
Both companies are chaired by Elon Musk (pictured) who owns more than a 20 per cent stake in each, and who said that the deal would conservatively create synergies of $US 150 million in the first year after closing.
“The idea is that there is one sales process, one installation process, one service contact, one phone app to monitor things,” said Musk.
S&P Global Market Intelligence analyst Efraim Levy said in a research note that, “We see benefits from a combined solar/storage offering and manufacturing efficiencies, but remain concerned about cash flow and capital needs.”.
“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.”
Neither company is yet profitable, and USA Today notes that SolarCity made an operating loss of $US 768.8 million in 2015.
Some analysts were skeptical of the Tesla decision, with the company being until now mainly a car maker (though which launched its PowerWall lithium ion storage product last year).
“It’s a bailout,” said Jesse Pichel, an investment banker at Roth Capital Partners, according to The Wall Street Journal.
“SolarCity has had a hard time raising money.”