Tesla Motors has received the green light from the Federal Trade Commission (FTC) to acquire SolarCity, allowing the electric vehicle company to overcome one more hurdle in its $2.6 billion purchase of the struggling solar energy group.
The deal was included in a list of proposals that received swift approval from the FTC since the companies seeking to merge did not pose any anticompetitive concerns and had few overlaps or none at all.
Now, with the FTC's approval, Tesla only needs to file merger papers with the U.S. Securities and Exchange Commission and set a date for shareholders to vote.
Tesla's goal for the acquisition is to build a one-stop shop for environment-conscious consumers who are interested in electric vehicles, home battery storage and solar panels, and making bold energy-efficient choices. All this would be housed under the Tesla brand.
Elon Musk, who helms Tesla as CEO, is also the largest individual shareholder and chairman of SolarCity, while his cousins Lyndon Rive and Peter Rive are the chief executive and chief technology officers, respectively.
Musk's close ties with people from SolarCity have given rise to concerns over conflict of interest, but the Tesla CEO and the brothers Rive have recused themselves from the decision-making process and will let investors vote on the matter.
Tesla investors were, however, reportedly questioning whether SolarCity would even be an asset to Tesla, given how the solar energy company has been facing a downturn in the sustainable energy market lately.
Analysts see the takeover bid as a lifesaver for SolarCity, which has been struggling to spur growth in the volatile industry of renewable energy.
Large-scale energy systems that power local utility services do open up another energy source for communities. But SolarCity's smaller-scale solar rooftop installations, designed for single homes, rely on government subsidy to make the technology affordable to homeowners.
And state governments are not entirely sold on the viability of solar energy as an alternative source. Some states even offer limited subsidies. One federal tax credit shoulders a third of the installation cost. Without these subsidies, however, the adoption of solar rooftops could be expensive for home and building owners.
In effect, the drop in installations has resulted in trouble for SolarCity. In the second quarter of 2016, the company registered a cash balance of only $146 million, less than a third of its cash balance of $489.1 million in the same quarter of the previous year.
