California became the first state to require solar panels to be installed on almost all new homes built after 2020.

Tesla Makes $2.6 Billion Offer for SolarCity

"Solar and storage are at their best when they're combined. As one company, Tesla (storage) and SolarCity (solar) can create fully integrated residential, commercial and grid-scale products that improve the way that energy is generated, stored and consumed," their announcement states.

Tesla and SolarCity announced Aug. 1 that they have agreed to merge, thus "creating the world's only vertically integrated sustainable energy company," according to the companies. SolarCity is based in San Mateo, Calif.; Tesla made an offer for the company a month earlier.

"Solar and storage are at their best when they're combined. As one company, Tesla (storage) and SolarCity (solar) can create fully integrated residential, commercial and grid-scale products that improve the way that energy is generated, stored and consumed," their announcement states. "Now is the right time to bring our two companies together: Tesla is getting ready to scale our Powerwall and Powerpack stationary storage products and SolarCity is getting ready to offer next-generation differentiated solar solutions. By joining forces, we can operate more efficiently and fully integrate our products, while providing customers with an aesthetically beautiful and simple one-stop solar + storage experience: one installation, one service contract, one phone app.

"We expect to achieve cost synergies of $150 million in the first full year after closing. We also expect to save customers money by lowering hardware costs, reducing installation costs, improving our manufacturing efficiency and reducing our customer acquisition costs. We will also be able to leverage Tesla's 190-store retail network and international presence to extend our combined reach."

The deal is an all-stock transaction with an equity value of $2.6 billion based on the five-day volume-weighted average price of Tesla shares as of July 29, 2016. Their agreement calls for SolarCity stockholders to receive 0.110 Tesla common shares per SolarCity share, valuing SolarCity common stock at $25.37 per share. But as part of the agreement, SolarCity has a "go-shop" that runs through Sept. 14, 2016, meaning the solar energy company is allowed to solicit alternative proposals during that time.

"While today's news is a big step, it isn't the finish line – we expect the transaction to close in the fourth quarter of 2016. Before then, the deal must be approved by a majority of the disinterested shareholders of both Tesla and SolarCity voting at each shareholder meeting. We also need to obtain regulatory approval and meet other closing conditions," their announcement says.

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