Shareholders are still to be convinced on the benefits of this merger. Tesla’s second quarter results could be a key component in their being convinced of the benefits of such a deal.
According to sources familiar with the matter at hand, SolarCity Corp and Tesla Motors Inc have agreed to a merger. This now sets the stage for a campaign to convince the respective shareholders to back this deal.
Earlier this July, Elon Musk unveiled “part deux” of his master plan which essentially combines the synergies of both companies into one single low-carbon lifecycle process, in which SolarCity’s clean energy will drive Tesla all-electric clean energy car.
Although Musk is the CEO of both companies, a merger between the two cannot be guaranteed since SolarCity had formed a special committee to review Tesla’s offer, independent of Musk’s influence and other executives who are close to him.
According to sources, the merger agreement could include a go-shop provision that essentially allows SolarCity to continue to solicit offers from potential buyers, for a short period of time, even after the merger.
Earlier, Tesla had previously offered 0.122 shares for every 0.131 SolarCity share.
Sources were not in a position to provide the exact terms of the deal. They requested the cover of anonymity since the negotiations are on-going and are confidential.
While SolarCity has a market capitalization of $2.6 billion, Tesla’s market capitalization is $34.6 billion.
Musk opines that combining the activities of the two companies could the overall operations of the combined company more effective for consumers. Case in point: solar panels installed at the roof of the cars could store their energies in Tesla’s batteries in their homes, which can be used to charge the car’s own batteries. Naturally, Tesla’s $5 billion Gigafactory outside Sparks, Nevada, is going to play a central role in this combined enterprise.
Although shareholders were initially apprehensive of Tesla’s June 21 offer, they have however gradually warmed up to the deal.
Besides Musk, several SolarCity executives, including Musk’s cousins, Lyndon Rive, SolarCity’s CEO and Peter Rive, a board member in SolarCity, have recused themselves from voting in the proposed merger.
Tesla is scheduled to release its second-quarter results on Aug. 3.