Tesla Motors (TSLA) made an offer Tuesday to buy solar energy provider SolarCity (SCTY) in a $2.79-billion deal that would consolidate billionaire entrepreneur Elon Musk’s energy-related businesses.
Musk sounded thrilled at the prospect, but Tesla shares were falling sharply after the close of trading.
The move would bring together the stationary power storage business that Tesla has been developing with SolarCity’s expertise in rooftop solar panels. Musk says it would allow one-stop shopping for business and homeowners who want solar power and a battery system to store the energy from sunlight after the sun goes down. “Painless, easy” and “everything works,” he told reporters.
“The timing is driven by the product and providing compelling solutions to customers,” said Musk, chairman of SolarCity and CEO of Tesla. In addition, he is also CEO of SpaceX, the rocket maker.
Tesla plans to offer $26.50 to $28.50 a share to SolarCity shareholders through the issuance of Tesla stock, which Tesla says would be a premium of 21% to 30% to SolarCity’s closing price Tuesday and the weighted five-day average Tesla shares. Based on SolarCity having 98.3 million shares outstanding as of March 31, the value would be nearly $2.8 billion based on a closing price Tuesday of $21.19, which was down 69 cents or 3.15%, for the day.
In afterhours trading, SolarCity shares were up $3.66 or 17.3% to $24.85. By contrast, Tesla investors didn’t sound thrilled: Shares sank $28.62 or 13% to $190.99 after hours.
The proposed exchange ratio is 0.122 to 0.131 shares of Tesla common stock for each share of SolarCity common stock.
In a post on its blog, Tesla that the addition of SolarCity will make the company the only “vertically integrated energy company offering end-to-end clean energy products” from car to home to business.
Shares of SolarCity are down more than 60% this year as investors grow tired of the company’s growing losses. The company lost $61.8 million over the past 12 months, which is even steeper than the $58.3 million is lost in 2015 and $56 million it lost in 2014.
Musk is the largest owner of SolarCity shares, holding 21.8 million shares or 22.2% of the company, according to S&P Global Market Intelligence of of March 31. His stake in the company was worth $478 million. He’s also Tesla’s top shareholder, with 21% of outstanding shares.
Shares of SolarCity jumped more than 20% in afterhours trading. Shares closed at $21.19 a share in regular trading, down 69 cents or 3.2%.
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