Tesla has received approval to acquire solar panel company SolarCity for $2.6bn, in a move which comes at a financial crossroads for a solar industry, which is facing the prospect of an oversupply of solar panels.
Tesla Motors’ Chief Executive, Elon Musk, is buying $65m of bonds from SolarCity Corp, a deal which comes after the money-losing solar panel company said it would cut operating costs to bring expenses in line with its reduced solar installation outlook.
SolarCity’s recent economic dire straights and subsequent cost cutting is a reflection of an industry where solar manufacturers who have ramped up production now face a glooming glut of panels, which has forced companies such as SolarCity to adjust or face dire consequences.
A factor in the slow down for demand is the world’s largest market of China and it’s government’s reduction of subsidies for solar farms commissioned after June 30.
Tesla dream receives approval from regulators
Tesla received approval from federal anti-trust regulators from the Federal Trade Commission to acquire the struggling SolarCity, a company in which Elon Musk has previous ties with, as Solar City’s current largest shareholder and cousin of its CEO.
Tesla announced the merger of SolarCity in June and on August 1 proposed terms for the takeover; with owners of SolarCity shares to receive 0.11 shares of Tesla stock for every share of SolarCity stock they own.
SolarCity was offered 45 days to find a better deal from August 1 before the companies propose their deal to the US Securities and Exchange Commission, but despite this offer the deal is expected to move forward.
Although SolarCity has already accepted the deal, final approval of the deal will depend on independent shareholders.
Musk has said that one of his aims for acquiring SolarCity was to create an integrated solar platform through which houses could generate their own electricity, store that energy in a Tesla Powerwall and charge their electric vehicle.
Tesla stocks have slipped $21.00 since the announcement on 1 August and are currently trading at around $211.00.