Electric vehicle manufacturer Tesla Motors yesterday announced a plan to purchase solar photovoltaic (PV) panel maker Solar City.
The company plans to offer $2.8bn for SolarCity, at a price of $26.50 to $28.50 per share.
SolarCity is the market leader in the US for solar PV, however has been struggling to make a profit.
According to a statement released by Tesla Motors, the company is interested in combining SolarCity’s panels with energy storage options marketed by Tesla.
“Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently, but they still need access to the most sustainable energy source that’s available: the sun,” the company explains.
They go on to say that they want to be the world’s first “vertically integrated energy company”, and envisage a future where SolarCity panels would charge Tesla Powerwall batteries and Tesla electric vehicles to provide an “end-to-end” energy product.
In a conference call with reporters, Tesla Motors CEO Elon Musk explained this reasoning further.
“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,” he said according to Reuters. “It’s an obvious thing to do.”
Conflict of interest
While Elon Musk is the CEO of Tesla Motors, he is also the Chairman of SolarCity, raising the issue of potential conflict of interest in this acquisition.
Given SolarCity’s significant debt load compared to its income, the long term viability of the company had been questioned. As such, some have been quick to point out that this offer by Tesla looks like an attempt by Mr Musk to bail out another of his companies.
In order to preempt some of these accusations, Musk has promised to sit out the board votes for both companies on whether this deal goes ahead. Nonetheless, shareholder discontent could still make the deal much harder to bring to fruition.
Reflecting this negative shareholder sentiment, shares in Tesla Motors has dropped more than 12% in the last day of trading.