Musk offers to buy Solar City for $2.5 billion

Elon Musk

In quite a surprise move, Elon Musk's Tesla Motors has just offered to buy his cousin Lyndon Rive's company, SolarCity, in an all-stock deal that values the solar installer at more than $2.5 billion. This proposal represents a value of $26.50 to $28.50 per share, or a premium of approximately 21 percent to 30 percent over the closing price of SolarCity’s shares.

It's now up to the shareholders. The vote happens after the due-diligence process by the board is completed. Musk would not set a date.

Elon Musk said that the deal makes sense "from a product integration standpoint and in offering" a "tight integration of the product." Musk sees this as a compelling solution and a "no-brainer," allowing a consumer to go into a store and "with a few clicks" buy an electric vehicle, a solar system and an energy storage system. It makes "more effective use of our stores," said Musk.

A release from Tesla says that the combination of the two firms "would be the world’s only vertically integrated energy company offering end-to-end clean energy products to our customers. This would start with the car that you drive and the energy that you use to charge it, and would extend to how everything else in your home or business is powered. With your Model S, Model X, or Model 3, your solar panel system, and your Powerwall all in place, you would be able to deploy and consume energy in the most efficient and sustainable way possible, lowering your costs and minimizing your dependence on fossil fuels and the grid."

Musk spoke of the new company not so much as an automotive company, but rather as a sustainable energy company.

One of GTM Research's analysts had this to say: "A 21 percent to 30 percent premium on a depressed stock price, paid entirely in equity in another risky company. Don't know that I'd take this as a SCTY shareholder."