Tesla moves to snap up SolarCity

The news did not go down well with investors, though, sending Tesla share prices plummeting.

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Tesla Motors

Tesla hopes to snap up solar energy provider SolarCity in a deal worth almost $3 billion to further the company's renewable energy and battery plans.

Tesla revealed the offer on Tuesday, claiming the potential acquisition of SolarCity made sense as the firm's mission has "always been tied to sustainability."

In March last year, the firm launched Tesla Energy, which aims to promote home-based renewable energy storage through Powerwall and Powerpack battery cells.

However, Tesla wants to go a step further by harnessing the best source of renewable energy we have: the sun. That's where SolarCity comes in.

Founded in 2006, SolarCity specializes in providing solar energy for homes and businesses in the United States. The company has used Tesla battery packs in solar projects, and now may be acquired by the automaker to push this research further.

In a letter sent to SolarCity's board, Tesla offered to acquire all outstanding shares of common stock of SolarCity in return for Tesla common shares at an exchange rate of 0.122x to 0.131x shares of Tesla common stock for each share in SolarCity, which represents a premium price of $26.50 to $28.50 per share.

At the time of writing, SolarCity commands a price of $21.19 per share after jumping at the release of the news. However, Tesla shares took a 13 percent dive as investors reacted to the idea of CEO Elon Musk paying a premium for SolarCity, of which he is already chairman.

Due to Musk's involvement in both companies, the executive will not be voting once the matter is taken to the board.

The deal could be worth up to $2.8 billion and has been described by the Tesla CEO as a "no brainer."

"We would be the world's only vertically integrated energy company offering end-to-end clean energy products to our customers," Tesla claims.

"This would start with the car that you drive and the energy that you use to charge it, and would extend to how everything else in your home or business is powered. With your Model S, Model X, or Model 3, your solar panel system, and your Powerwall all in place, you would be able to deploy and consume energy in the most efficient and sustainable way possible, lowering your costs and minimizing your dependence on fossil fuels and the grid."

Tesla also said the deal was a great "cultural fit" and the acquisition would also result in improved installation systems for both solar panels and Tesla vehicle batteries and charging stations.

Tesla is foremost a vehicle manufacturer, but with the launch of the Gigafactory this year, the automaker may be able to create fresh avenues for profit in the renewable energy market by developing batteries for more than cars.