SolarCity has announced that it has accepted the Tesla Motors offer to acquire it for $2.6 billion, which will be paid in shares. Every SolarCity share was assessed at $25.83 and for each one the shareholders will receive 0.11 Tesla Motors shares. The peculiar characteristics of this agreement is that Elon Musk (photo ©Dan Taylor / Heisenberg Media) is the CEO of Tesla Motors, the chairman of SolarCity and is a shareholder of both companies.

SolarCity was founded in 2006 by the brothers Peter and Lyndon Rive in collaboration with Elon Musk, who is their cousin. For years it developed its design and sale of solar energy systems activity and in June 2014 acquired the solar panels manufacturer Silevo, taking a step forward in supplying systems of this type to become the leading manufacturer and installer at residential level in the USA.

The acquisition offer by Tesla Motors is due to the synergies that are possible between the two companies. The offer was made in June but it took a few weeks for its acceptance because of Elon Musk’s situation. Because of his possible conflict of interests Musk kept out of the board of directors’ vote and an internal committee evaluated the offer to protect the shareholders.

Actually SolarCity has until September 14 to find other buyers that might offer more money but it would be a truly surprising event. If all goes as planned and the agreement is approved, it will be a huge step forward for Elon Musk in his masterplan to integrate his offerings connected to renewable energy sources.

According to Elon Musk, working as a single company Tesla Motors and SolarCity will save at least $150 million in the first year after the merger. The agreement, however, goes far beyond a better management of costs although these savings would already be a great thing for two companies that are at cutting-edge but struggle to generate earnings.

The ultimate point of this merger is to combine the offers to increase revenues. Tesla Motors will sell solar energy systems and this makes sense for a company that sells electric cars. Buyers are likely sensitive to environmental problems so the idea of using a renewable source to produce electricity needed to their car and also to their home should be interesting.

Last week Tesla Motors has officially inaugurated Gigafactory, a mega-factory that is already active but only in part to bring the production of batteries to unprecedented levels over the next few years. These are the batteries to be used for the cars produced by the company and other vehicles that the company is designing. Powerwall and Powerpack are also produced to combine with solar panel systems to get charged during the day and power the house at night.

The Tesla Motors and SolarCity merger divided opinions: some see in a positive way the synergy between the two companies while others believes that the merger will create an even greater need for new capital that might not arrive. Immediately after the announcement SolarCity share rose while Tesla Motors shares suffered a small loss.

The potential is huge and betting against Elon Musk is a risk considering that more than once he was considered a madman. Of course, there is the problem that Tesla Motors and SolarCity are still not earning money but they’re bringing significant technological advances, as well as the other Musk’s company, SpaceX. The plan is long term so we will see its results in the coming years.