Tesla's (TSLA) Surprise Bid for SolarCity (SCTY) Not Seen as 'No-Brainer'

Tesla's (NASDAQ: TSLA) Chairman and CEO Elon Musk described the company's surprise offer to acquire solar installation firm SolarCity (NASDAQ: SCTY), a company he is chairman of, as a "no-brainer" to reporters yesterday. He further defended the move in a conference call on Wednesday morning, saying he has zero doubt about the deal.

Rod Lache, an analyst at Deutsche Bank, was among those who disagreed with Musk's characterization of the deal as an obvious decision. While Tesla and SolarCity may fit, "it's not a no-brainer," said Lache.

"[Tesla shareholders] are generally not looking for an end-to-end energy solution." the analyst said, "Overall, while we see potential for synergies, and we acknowledge that the acquisition of Solar City would only increase Tesla’s outstanding shares by 8-9%, we believe that Tesla Investors will generally view this development as a negative, as it could produce a distraction while management would benefit more by focusing on their impressive growth plans (i.e. growing from 50k to 500k to 1,000k units)."

In truth, rumors about a takeover of SolarCity were not entirely out of the blue. On March 3rd, a spokesperson for SolarCity declined to comment to StreetInsider when asked about rumors regarding a leveraged buyout by Musk. At the time there was no discussion of a possible takeover by Telsa, and there were few if any other hints that it was even in the cards.

Charles Anderson, analyst at Doughtery, summed up a view shared by many, "...we feel confident in saying this was not an outcome the Market expected."

Shares of Tesla traded lower by 11% Wednesday morning.

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