Tesla describes this as a "fully integrated residential, commercial and grid-scale product" which aims to improve the way energy is generated, stored and consumed.
Now is the right time to bring the two companies together, it said, citing its preparation to scale its Powerwall and Powerpack stationary storage products, as SolarCity is getting ready to offer next-generation solar solutions.
SolarCity stockholders would receive 0.110 Tesla common shares for every share held, the companies said on Monday.
The agreement allows SolarCity to solicit alternative proposals for 45 days. Should Tesla and SolarCity get the necessary approval for the deal, the acquisition should be completed sometime in Q4 2016. Musk has said the combined company would become a clean-energy giant providing electric vehicles powered by solar rooftops and battery storage systems. In a staggering coincidence, Tesla just officially bought SolarCity for $2.6 billion, the AP reports.
In the meantime, markets and market watchers have responded less certainly than Shah, with share prices tumbling 4.14% and 1.92% at SolarCity and Tesla, respectively, since announcement of the deal on Monday (August 1). It looks like that approval has arrived, with Tesla announcing today that it has struck a deal with SolarCity and will now move forward with the acquisition process. The deal is also contingent on a green light from shareholders as well as financial regulators.
The deal must still be approved by the government and shareholders at both companies.
Musk seems confident about achieving cost synergies of $150 million in the first full year after closing the merger. SolarCity's shares have been valued at $25.37 per share.
SolarCity, which is the US's biggest supplier of solar energy, is 23pc owned by Mr Musk. With the combination of two companies, they said, there could be an easy "one-stop solar + storage experience".
Elon Musk will also serve as the also chairman and a major shareholder in SolarCity. It believes that this can be achieved by leveraging Tesla's existing retail chain and global presence. Tesla's proposed buyout comes just a month after the electric vehicle maker's initial all-stock offering.