×

Tesla and SolarCity merger gets approval from shareholders

Shareholders for SolarCity and Tesla voted Thursday to approve merging the two companies.

"Tesla's shareholders have overwhelmingly approved our acquisition of SolarCity," said a statement from Tesla sent to CNBC. "Excluding the votes of Elon and other affiliated shareholders, more than 85% of shares voted were cast in favor of the acquisition. With SolarCity's shareholders also having approved the acquisition, the transaction will be completed in the coming days."

Tesla will pay $2.6 billion to acquire SolarCity, which has struggled financially despite revenue growth.

In a question and answer session following the announcements, Tesla chairman and CEO Elon Musk, who also chairs SolarCity, said the company plans to begin volume production of its recently announced solar roof sometime in summer of 2017. The company will roll out the different varieties in three month intervals, starting with the one that appears to be most popular.

Costs will vary according to the size of the house and the difficulty of the installation, Musk said.

"The important thing is that the apples-to-apples comparison compared to a regular roof will be at least at, and we believe slightly below the cost of a regular roof, and the electricity is just a bonus," Musk said, adding that would include labor costs and exclude any money from subsidies.

The merger has divided investor and analyst opinion. Some Tesla shareholders have filed lawsuits against the deal, and critics have called it a bailout for SolarCity.

"We believe that shareholder approval of the TSLA purchase of Solar City is dilutive to TSLA's profitabiity, will detract from senior management attention, and contribute to increased capital market funding requirements in '17," said CFRA analyst Efraim Levy, in comments sent to CNBC after Tesla's announcement. "That said, we think the removal of some uncertainty that we believe has weighed on TSLA shares could itself be a positive. Also, while adding costs and risks, long-term SCTY has the potential for its own profit stream, even excluding synergies. Elon Musk is clearly a force for change, but we think TSLA shareholders will see rewards delayed."

Musk, who holds about 22 percent of SolarCity stock and 22 percent of Tesla's, recused himself from both votes, as did other insiders such as director Antonio Gracias and J.B. Straubel. Gracias, the founder of Valor Equity Partners, sits on both companies' boards, and Straubel was part of Tesla's founding team and serves as its chief technical officer, according to company filings.

The merger comes as the solar energy business is showing signs of a slowdown.

GTM research's Global Solar Demand Monitor forecasts the solar energy industry will contract by 7 percent next year.

But Institutional Shareholder Services, which advises mutual funds and other institutional shareholders on such matters, recommended the investors vote in favor of the deal. The influential firm said the acquisition for "a necessary step toward TSLA's goal of being an integrated sustainable energy company."

Earlier this month, Tesla and SolarCity executives made the case that SolarCity was on solid financial footing and wouldn't drain Tesla's resources.

Tesla said it expects SolarCity to add more than half a billion dollars in cash to Tesla's balance sheet over the next 3 years.