Trending: Amazon to host free concert from roof of Seattle’s Pike Place Market with The Head and The Heart
Tesla and Gigafactory
A Tesla electric car is parked on an overlook with a view of Tesla’s Gigafactory 1 facility in Nevada. (Credit: Tesla Motors)

The boards of directors for Tesla and SolarCity, two companies that have billionaire Elon Musk as a top executive, have given the green light for a $2.6 billion merger.

The two companies said the combination would create “the world’s only vertically integrated sustainable energy company,” bringing together Tesla’s electric car line and its home battery offerings with SolarCity’s power-generating business.

“By joining forces, we can operate more efficiently and fully integrate our products, while providing customers with an aesthetically beautiful and simple one-stop solar + storage experience: one installation, one service contract, one phone app,” Tesla and SolarCity said in a joint press release.

The approvals came after a review of Tesla’s merger proposal, the terms of which were laid out publicly last month. Musk helped orchestrate the deal, but he stayed out of the review or the board vote to head off conflict-of-interest concerns. He serves as the CEO of Tesla, and he’s the chairman of SolarCity as well as the biggest shareholder of both companies.

In a tweet, Musk emphasized that his privately held space venture, SpaceX, does not figure in the deal and would never merge with Tesla.

The Tesla-SolarCity agreement involves an all-stock transaction that values SolarCity at $25.37 a share, which works out to $200 million less than the price that was set last month.

Tesla said it expected to achieve cost efficiencies of $150 million in the first year of combined operation, and promised lower hardware costs and installation costs for customers.

The company is ramping up the production of batteries for its cars as well as its Powerwall and Powerpack electricity storage devices at its $5 billion Gigafactory 1 facility in Nevada. The sprawling factory is still under construction but already has begun limited production.

SolarCity has struggled to gain traction with its rooftop solar-panel services, and the price specified in the merger deal is less than half of what it was a year ago. But the companies said SolarCity was “getting ready to offer next-generation differentiated solar solutions.”

Reuters quoted some analysts as voicing skepticism that the Tesla-SolarCity merger will lead to a quick turnaround, in part because both companies are highly leveraged with cash-flow challenges.

Shares of Tesla and SolarCity were both down slightly in trading today.

The merger agreement includes a “go-shop” provision that gives SolarCity 45 days to solicit alternative offers. The deal is also contingent on a green light from the companies’ “disinterested” shareholders as well as from financial regulators. Both companies said they expected to receive those approvals and close the deal by the end of the year.

Subscribe to GeekWire's Space & Science weekly newsletter


Job Listings on GeekWork

Cloud UX/UI React.js DeveloperMaxset Worldwide Inc.
Computer Science InstructorRenton Technical College
Find more jobs on GeekWork. Employers, post a job here.