From The Editors Technology

Tesla and SolarCity Merger Announced

Ever since the proposal of the merger was made public by Tesla in June, it had been a hot topic of discussion among Tesla shareholders. They had some uncertainty and apprehensions about Tesla adding additional liability to the company’s resources by buying out SolarCity which was in an increasingly slowdown phase.

However, in the intervening months, Tesla CEO Elon Musk managed to convince shareholders of the advantages he envisioned in the merger. This was made evident, on Thursday, by the margin of approval with which Tesla shareholders supported the merger; it was a whopping 85%.

Earlier in the month both sides had made the point that “SolarCity was on solid financial footing and wouldn’t drain Tesla’s resources.” The following statement was sent out by the Tesla as shareholders from both sides gave their collective nod to the merger:

“Tesla’s shareholders have overwhelmingly approved our acquisition of SolarCity,” said a statement from Tesla. “Excluding the votes of Elon and other affiliated shareholders, more than 85% of shares voted were cast in favor of the acquisition. With SolarCity’s shareholders also having approved the acquisition, the transaction will be completed in the coming days.”

The company is said to have acquired SolarCity at a cost of $2.6 billion. The merger is expected to be beneficial to shareholders from both sides. It is believed that merging the two companies into one entity would yield a “green-energy company” as their products complement each other – Tesla manufactures electric cars while SolarCity is, arguably, the largest supplier of solar panels in America.

“We would like to thank our shareholders for continuing to support our vision for the future,” Tesla said in a statement. “We look forward to showing the world what Tesla and SolarCity can achieve together.”

The billionaire founder of both companies believes the deal would provide better revenue for the two in the next three years
The billionaire founder of both companies believes the deal would provide better revenue for the two in the next three years

Following the announcement, Tesla CEO Elon Musk, in a question and answer session, announced the company’s plans of starting bulk production of solar roof sometime in 2017. The company intends to manufacture the panels in different varieties and introduce each variety in three-month intervals.

Musk made it clear that costs, would take into consideration the size of the house and installation logistics and may, therefore, vary. “The important thing is that the apples-to-apples comparison compared to a regular roof will be at least at, and we believe slightly below the cost of a regular roof, and the electricity is just a bonus,” is what Elon Musk said, going on to add it would include labor costs but not any money from subsidies.

Tesla anticipates that the acquisition of SolarCity would result in an additional $500 million cash in the company books over a period of three years. The merger has caused split opinion among investors and analysts. Out of the 15% that voted against the deal, some Tesla shareholders are reported to have filed lawsuits against the merger.

GTM research’s ‘Global Solar Demand Monitor’ has predicted that the solar power business will decline by 7% next year. On the other hand, Institutional Shareholder Services, which advises mutual funds and other institutional shareholders on investment and related matters, ‘recommended the investors vote in favor of the deal.’

They are reported to have said, the merger “a necessary step toward TSLA’s goal of being an integrated sustainable energy company.”

Despite apprehensions from certain quarters, “In our opinion, investor focus will return to the ramp of the Gigafactory, Model S and X production, and the ramp of Model 3 production, and we believe shares will move higher with execution,” Analyst Ben Kallo at Robert W. Baird wrote in a message to clients.

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