The stock price of SolarCity (NASDAQ:SCTY) soared nearly 15% to $24.31 per share during the extended trading hours on Tuesday. The significant increase was driven by the proposal of Tesla Motors (NASDAQ:TSLA) to acquire the solar energy company.
Tesla’s offer to SolarCity
Tesla offered to acquire all of the outstanding shares of common stock of SolarCity in exchange for its common stock, subject to completing due diligence. The electric car manufacturer proposed an exchange ratio of 0.122 times to 0.131 times shares of Tesla common stock for each share of SolarCity common stock.
The acquisition offer is around $26.59 to $28.50 per share, which represents a premium of around 21% to 30% over the closing price of SolarCity’s stock on Monday, June 20. The total value of the stock deal is around $2.8 billion.
Fair & compelling offer
According to the electric car manufacturer, its proposal for SolarCity is fair and compelling for the solar energy company and its shareholders. The Board of Directors of Tesla believes that the “possibilities for product, service and operational synergies would be substantial.
It also believes that a merger allows both companies to build and maximize its respective core competencies and will continue to lead in delivering innovative solutions for sustainable energy and transportation.
The companies would be able to further expand its addressable market and provide the best possible installation service for all of its clean energy products. Combining Tesla and SolarCity will create the “world’s only vertically integrated energy company offering end-to-end clean energy products” from electric cars, solar panels systems, and Powerwall to customers.
Tesla is confidence that it is well-positioned to negotiate and complete the transaction in an expedited manner.
Elon Musk and Lyndon Rive recuse themselves from voting on the deal
Tesla Chairman and CEO Elon Musk recused himself from voting on the transaction at the company’s Board meeting. As Chairman of the Board of SolarCity, he will also recuse himself from voting on the proposal. Musk He owns 19% stake in the electric car manufacturer and 22% stake in the solar energy company.
According to Musk, the deal is a “no brainer,” during call with reporters. He explained, “Instead of making three trips to a house to put in a car charger and solar panels and battery pack, you can integrate that into a single visit. It’s an obvious thing to do.”
On the other hand, SolarCity CEO Lyndon Rive said the company’s Board is considering Tesla’s proposal. He also recused himself from the decision making process. He believed that there are “tremendous synergies” between the companies.