Tesla SolarCity merger approved

Elon Musk, the chief executive of electric car maker Tesla has announced it is to buy its sister company SolarCity.

Musk is the largest shareholder in both firms and is chairman of SolarCity, which was founded by two of his cousins – Lyndon Rive and Peter Rive.

A special independent committee was set up to advise on the merger and Musk, his cousins and some other executives did not vote on whether or not it should go ahead. The deal has been criticised by some on Wall Street.

The price is $2.6 billion (2.33 billion euros) – all in Tesla shares rather than cash – which is $200 million (179 million euros) less than was originally proposed.

Combining the two companies is a major part of Musk’s ‘master plan’ strategy for consumers to have a single source for their low-carbon lifestyle.

It would install solar panels on their roofs which would send power to Tesla storage batteries in their homes, and Tesla cars in their garages.

Musk touted it as the world’s only vertically integrated energy company.

SolarCity declines as Tesla buys company for $2.6 billion https://t.co/CiZ2bhiMcx pic.twitter.com/ntEpWhM8Mz— Bloomberg (@business) August 1, 2016

Musk said the combined companies will have a “stronger balance sheet,” but likely will require a “small equity capital raise” next year. Both companies have been burning through cash and have projected achieving positive cash flow later this year.

Tesla and SolarCity expect to save $150 million in costs in the first full year after the deal closes as the combination would improve manufacturing efficiencies and reduce customer acquisition costs. Musk said he thought the combined companies could “significantly exceed” that mark in the first year.