10 Comments

Summary:

Electric car company Tesla might say publicly that it wants to remain an independent company for growth purposes, but another reason is that auto maker Daimler basically has the right of first refusal when it comes to acquiring the company.

Tesla Model A Alpha Electronics Version

Tesla Model A Alpha Electronics Version

The blogosphere widely picked up Bloomberg’s story that electric car maker Tesla isn’t necessarily looking to sell itself right now and wants to remain an independent company. If you think about it, why would Tesla CEO Elon Musk actively try to sell Tesla now after working so hard to get to the point where Tesla is at currently, surviving a low period of little funding a year ago? But the real elephant in the room, when it comes to Tesla selling itself, is: Tesla’s automaker and investor Daimler.

We’ve mentioned this in previous filings, and Tesla also states this in the latest filing associated with its second offering and private placement, and Tesla writes:

Our financing agreements with Blackstar, an affiliate of Daimler, include certain restrictions that decrease the likelihood that potential acquirers would make a bid to acquire us, including giving Blackstar a right of notice on any acquisition proposal we receive for which we determine to engage in further discussions with a potential acquirer or otherwise pursue. Blackstar then has a right, within a specified time period, to submit a competing acquisition proposal.

So, basically if a company really wanted to buy Tesla, it would have to step over Daimler to do so. Daimler is no small company. Maybe an automaker acquirer wants to do that, or maybe it doesn’t.

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  1. Katie Fehrenbacher Thursday, May 26, 2011

    @Mark, Yeah, I think Toyota would certainly would be one of the contenders if Tesla was looking to sell. Another question I have is just how M&A friendly is the auto industry? It doesnt have the same type of history as the IT industry does for M&A. At the same time, the auto industry is trying to be more innovative, so maybe they will seek to buy instead of build, which can sometimes be easier (and faster).

  2. Given how much Daimler lost on Chrysler, I’ll be shocked if they buy another over-priced American car company. Most likely they will figure out how to access Tesla’s technology, which will be much less expensive than buying the whole company.

  3. why on earth would somebody spend $2.5b for a technology that costs a fraction of this to develop? further, every new EV and HEV model coming out between now and 2013 all look the same; specifically, they all look like the Model S. tesla is nothing more than a science experiment.

    1. @John Law Patents?

  4. Does anyone know what Daimler’s ROI on their investments in Ballard Power Systems has been? That might be a good comparison for Tesla.

  5. Lucian Armasu Thursday, May 26, 2011

    That’s great. I wouldn’t want Tesla to be acquired anyway. They have a far brighter future ahead of them on their own. From what I’ve seen they want to keep cutting the price in half for new generation electric cars every 3 years. I think they said there will be a $30000 model in 2015. We might see a $15000 model in 2018.

  6. Model A? or Model S?

  7. No big deal Tuesday, May 31, 2011

    Blackstar’s “right” is pretty weak and doesn’t really amount to much. All it really does is require Tesla to notify Blackstar and then wait for a response/ potential offer. There is no requirement by Tesla to accept that offer. In reality, even w/o this language, the Board would likely contact Daimler if they started having promising discussions with another company to fulfill it’s fiduciary duties.

    1. actually, there are 2 points here why there won;t be a sale until 2012. there is the right you mention above, and there is also blackstar’s deal with Musk, which prevents him from voting ofr or selling shares to a competitor. so that with the Blackstar holdings is a total of almost 40% of the Tesla stock.

      see this risk factor:

      Our current agreements with Blackstar, an affiliate of Daimler, contain certain restrictions that decrease
      the likelihood that potential acquirors would make a bid to acquire us.
      Our financing agreements with Blackstar, an affiliate of Daimler, include certain restrictions that decrease
      the likelihood that potential acquirors would make a bid to acquire us, including giving Blackstar a right of notice
      on any acquisition proposal we receive for which we determine to engage in further discussions with a potential
      acquiror or otherwise pursue. Blackstar then has a right, within a specified time period, to submit a competing
      50
      acquisition proposal. In addition, Elon Musk, our Chief Executive Officer, Product Architect, Chairman and
      largest stockholder, has agreed that he will not transfer any shares of our capital stock beneficially owned by him
      to any automobile original equipment manufacturer, other than Daimler, without Blackstar’s consent. Mr. Musk
      has further agreed not to vote any shares of our capital stock beneficially owned by him in favor of a deemed
      liquidation transaction to which any automobile original equipment manufacturer, other than Daimler, is a party
      without Blackstar’s consent. These provisions could delay or prevent hostile takeovers and changes in control of
      us, which could cause our stock price or trading volume to fall.

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