SolarCity (SCTY) Accepts Tesla’s (TSLA) $2.6 Billion Offer

Both SolarCity Corp and Tesla Motors Inc. announced on Monday that SolarCity has agreed to take Tesla Motors Inc’s offer of $2.6 billion to buy the solar panel installer.

The $2.6 billion offer represents just half of what SolarCity’s value was a year ago. The company has been struggling in its complex financial structure and the increased scrutiny of government incentives for rooftop solar.

SolarCity has cut its forecast for full-year installations by 10 percent from prior guidance. In 2017, the company said it expects improvement driven by integrated battery storage offerings and “a new solar product focused on the 5 million new roofs installed each year in the U.S.”

Elon Musk, Tesla’s CEO and chairman on both company’s boards, said on a call, “SolarCity’s cost of capital is higher than the individual in most cases.”

Musk has said that if the deal is consummated, the combined Tesla-SolarCity could require a “small equity capital raise” next year.

According to Musk, a capital increase could be a “low to mid single digit” percentage of Tesla’s market capitalization, which on Monday was about $34 billion.

Disclaimer: We have no position in Tesla Motors Inc. (NASDAQ: TSLA) or SolarCity Corp. (NASDAQ: SCTY) and have not been compensated for this article.