Tesla announced its intention to acquire SolarCity a month ago and now the companies have reached an agreement.

According to Elon Musk, Tesla Motors Inc has acquired solar panel installer SolarCity Corp for $2.6 billion. The planned acquisition is expected to bring “significant” cost savings and “dramatic improvements” in manufacturing efficiency of the company.

Musk stated that the acquisitionis a “no-brainer” that “we should have done sooner”. However, the fact is that Tesla shares dipped sharply on the day the initial offer was announced, which reflects Wall Street’s concerns.

“Now is the right time to bring our two companies together: Tesla is getting ready to scale our Powerwall and Powerpack stationary storage products and SolarCity is getting ready to offer next-generation differentiated solar solutions. By joining forces, we can operate more efficiently and fully integrate our products, while providing customers with an aesthetically beautiful and simple one-stop solar + storage experience: one installation, one service contract, one phone app”, says Tesla in the blog post.

Musk is the largest shareholder both in Tesla and SolarCity and his cousins Lyndon Rive and Peter Rive are co-founders of SolarCity. The combined work of two companies will hopefully achieve positive cash flow later this year while both companies have been burning through cash recently. SolarCity shares went down 5.1 percent at $25.34, while Tesla dropped 1.4 percent and reached $231.50. Musk says that the acquisition will have a “stronger balance sheet, but likely will require a small equity capital raise next year”.

According to the agreement between the companies, Tesla will hold 93.5 percent of the combined companies and SolarCity 6.5 percent. Tesla expects to close the deal in the fourth quarter. Before then, the acquisition must be approved by a majority of the disinterested shareholders of both Tesla and SolarCity. Besides, the companies must get regulatory approval and meet other closing conditions.

The combined work of Tesla and SolarCity will focus on the sale of solar panels, residential and commercial battery storage systems and electric vehicles under a single brand. “Solar and storage are at their best when they’re combined,” says Tesla.

As for the benefits for customers, Tesla reveals: “We expect to achieve cost synergies of $150 million in the first full year after closing. We also expect to save customers money by lowering hardware costs, reducing installation costs, improving our manufacturing efficiency and reducing our customer acquisition costs. We will also be able to leverage Tesla’s 190-store retail network and international presence to extend our combined reach.”

The agreement stipulates that SolarCity can solicit offers from other potential buyers for 45 days through September 14.

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