Inside the deal between Tesla and SolarCity

Yesterday, Tesla Motors [NASDAQ: TSLA] and SolarCity announced that "the two companies have reached an agreement to combine, creating the world’s only vertically integrated sustainable energy company." In the announcement, Tesla stated, "By joining forces, we can operate more efficiently and fully integrate our products, while providing customers with an aesthetically beautiful and simple one-stop solar + storage experience: one installation, one service contract, one phone app."

Why now? "Now is the right time to bring our two companies together: Tesla is getting ready to scale our Powerwall and Powerpack stationary storage products and SolarCity is getting ready to offer next-generation differentiated solar solutions... Solar and storage are at their best when they're combined. 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."

Source: Wall Street Journal

And, Tesla addressed the synergies between the two companies: "We expect to achieve cost synergies of $150 million in the first full year after closing. We also expect to save customers money by lowering hardware costs, reducing installation costs, improving our manufacturing efficiency and reducing our customer acquisition costs. We will also be able to leverage Tesla's 190-store retail network and international presence to extend our combined reach."

What are the terms of the deal announced? "this is an all-stock transaction with an equity value of $2.6 billion based on the 5-day volume-weighted average price of Tesla shares as of July 29, 2016. Under the agreement, SolarCity stockholders will receive 0.110 Tesla common shares per SolarCity share, valuing SolarCity common stock at $25.37 per share based on the 5-day volume weighted average price of Tesla shares as of July 29, 2016." Musk concluded in the Wall Street Journal yesterday: “It’s really all part of solving the sustainable energy problem... that’s why we are all doing this to accelerate the advent of a sustainable energy world.” For more, a copy of the investor presentation (source: Electrek*) follows below. 

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*Source: Electrek via Tesla