SolarCity unveils committee to evaluate Tesla offer

SolarCity has named a two-person special committee of directors to evaluate Tesla Motors’ recent $2.9bn offer, after many of the rooftop installer’s board members recused themselves from voting on the issue due to their relationships with Tesla.

The two-personal committee will include Donald Kendall Jr., chief executive of investment management firm Kenmont, and Nancy Pfund, founder and managing partner of DBL Investors.

SolarCity’s board has given the committee “exclusive authority to evaluate SolarCity’s long-term business plan and standalone opportunities for value creation against a broad range of strategic alternatives”.

The fact that just two of SolarCity’s eight board members will be on the committee – with the others having themselves – will fuel criticism that the companies are too closely related for a fair evaluation to take place, even if many of the board members are remaining officially on the sidelines.  

Also sitting on SolarCity’s board are Tesla chief executive Elon Musk, and his two first cousins, SolarCity chief executive Lyndon Rive and chief technology officer Peter Rive. All three have recused themselves from voting on Tesla’s offer, as has JB Straubel, a SolarCity board member and Tesla’s chief technology officer.

Ultimately, shareholders of the two companies will determine whether Tesla’s all-stock offer goes through. Elon Musk – the larger shareholder of both companies – won’t take part in the shareholder votes.

Tesla shareholders are likely to be a hard sell, with the company having lost 10% of its market value since the proposal was made.

Some critics say the offer amounts to a bailout of SolarCity, which despite its leading position in the booming US distributed solar market has struggled in recent months to win over investors with its promise of future profits.

SolarCity would bring a complex web of challenges and opportunities to Tesla, which already faces an ambitious ramp-up schedule and sky-high expectations.

The special evaluation committee has been retained Skadden Arps, Slate, Meagher & Flom as its legal counsel, and Lazard as its financial advisor.