Tesla Motors to buy SolarCity for $2.6 billion

NEW YORK: Elon Musk’s Tesla Motors reached an agreement to buy SolarCity Corp for $2.6 bn, about $300 mn less than an initial proposal criticised as a "bailout" for the solar company in which he’s the largest shareholder.

SolarCity investors will receive $25.37 a share in stock under the agreement, according to a statement Monday. Musk initially offered $26.50 to $28.50 a share in Tesla stock. Analysts have said in the past that the bid was too low and investors have questioned the wisdom of Musk combining his electric-car maker with the clean-energy company.

The deal, which allows SolarCity to solicit competing takeover offers through September 14, will now go to the shareholders of the companies for approval. Musk, who is chairman and the largest investor in both companies, recused himself from considering whether the deal should be approved by the SolarCity board when he announced the initial bid on June 21. Other SolarCity directors with connections to Tesla and Musk also excluded themselves from voting.

"The lower price probably reflects the lower results and forecast," said Jeffrey Osborne, an analyst at Cowen & Co, on Monday.

Additional interest in the company may emerge over the next few weeks from outside of the industry, he said. "The outlook for next year is a little murky." The price is less than half of what SolarCity was trading at the start of the year. Share prices have stumbled on concerns of rising costs and slowing growth.