Stratasys Concludes Merger Discussions with 3D Methods – 3DPrint.com

In a sequence of unfolding occasions, 3D Methods (NYSE: DDD) and Stratasys (Nasdaq: SSYS), two giants within the additive manufacturing (AM) business, appear to have ended discussions over a possible merger. The newest announcement from 3D Methods outlines a revised proposal to mix with Stratasys, whereas the latter continues to carry out for a previously-announced merger with Desktop Steel (NYSE: DM). On this case, Stratasys shouldn’t be solely rejecting the revised supply from 3D Methods, however has concluded negotiations.

Revised Proposal from 3D Methods

3D Methods not too long ago introduced a brand new supply aimed toward buying Stratasys. The revised proposal would see every share of Stratasys transformed into $7 in money together with 46% possession within the mixed entity. This comes after a gathering between the administrators of each corporations on August 22, 2023, the place Stratasys confirmed materials price synergies would come up from the mix however discovered the present valuation of 3D Methods shares insufficient for the deal. Stratasys additionally revealed its unwavering dedication to the Desktop Steel merger, declining additional discussions with 3D Methods.

Dr. Jeffrey Graves, President and CEO of 3D Methods, expressed disappointment, stating that regardless of concerted efforts to search out frequent floor, Stratasys stays unyielding. Graves accused Stratasys of “working out the clock” and going forward with a “massively value-destructive” merger with Desktop Steel.

The up to date proposal outlines a better inventory possession for Stratasys shareholders in comparison with an earlier proposal. This is available in response to Stratasys’ desire for much less money and extra upside participation. Furthermore, 3D Methods has assured a $50 million reverse termination payment payable to Stratasys if antitrust clearances will not be obtained. A $10 million retention program can be proposed for key expertise retention throughout each corporations.

Rejection by Stratasys

In response to the supply, the Stratasys Board argued that it “signify[ed] a price of $15.26 per share for Stratasys, and a premium of solely 3% to the unaffected closing inventory worth of Stratasys extraordinary shares as of Could 24, 2023,” which means that it “doesn’t represent a ‘Superior Proposal’ as outlined in Stratasys’ merger settlement with Desktop Steel.” In flip, “the Stratasys Board has terminated discussions with 3D Methods.”

The Board listed quite a lot of causes as to why it was not pleased with the deal, together with a perception that 3D Methods was not rising at a adequate price. The current information associated to one in every of 3D Methods’ largest clients, Align Applied sciences, and its acquisition of AM agency Cubicure, was one other situation introduced up. The Stratasys Board famous:

If 3D Methods’ dental enterprise declines on account of Align shifting its sourcing, 3D Methods’ profitability may fall even additional and overwhelm the margins of a mixed firm. We imagine that this could make it extraordinarily troublesome to realize engaging long-term working margins for a mixed firm.

It later went on to say:

“Income from Align Know-how, Inc. (“Align”), which represents 23% of 3D Methods revenues, will likely be anticipated to create extreme development challenges for 3D Methods. We imagine Align is prone to transition to multiple-source printing know-how over time. We had beforehand raised considerations that Align was prone to migrate away from 3D Methods’ stereolithography know-how in direction of DLP know-how for each oblique and direct printing of home equipment and different supply suppliers. Align’s not too long ago introduced acquisition of Cubicure GmbH, with its energy in direct 3D printing of home equipment, reaffirmed our considerations. At this stage, it’s extremely unsure at what market share and margins 3D Methods’ enterprise can function sooner or later as Align ramps up its personal options and extra alternate options proceed to develop. The influence may very well be extremely materials and calls into query whether or not the market presently displays the true intrinsic worth of 3D Methods’ enterprise.”

In the mean time, the U.S. Division of Justice is within the technique of investigating such a deal would violate antitrust legal guidelines, suggesting that an excellent bigger mixture between Stratasys and 3D Methods can be considerably harder. This was one other concern of the Stratasys Board, which wrote: “Based mostly on detailed joint evaluation by Stratasys and 3D Methods, a mixture of the 2 corporations would seemingly require a prolonged and intensive regulatory evaluation course of, an prolonged period to closing and important prices to acquire the required regulatory approvals.”

Different points included the time and problem related to executing a profitable integration, a plan for which 3D Methods apparently didn’t furnish.

Holding Out for Desktop Steel

Stratasys appears to be in no hurry to rethink its plans to merge with Desktop Steel. The corporate had acknowledged that it awaited “crucial” due diligence from 3D Methods earlier than making a call. Because it stands, Stratasys maintains its stance on preferring the Desktop Steel merger. The shareholders of each Desktop and Stratasys are set to vote on the merger on September 28, 2023.

Because the merger saga continues to unfold, it’s turn into clear that there are not any foregone conclusions and analysts on the subject are sometimes confirmed improper, together with this creator. Dr. Graves concluded his feedback, saying, “We’ll proceed to judge our choices in finishing this vital transaction to rework the additive manufacturing business.”

Our Printing Cash podcast is bound to have an replace, after already discussing the state of the negotiations in its newest episode. By the point of our Additive Manufacturing Methods occasion February 6-8, 2024, there’ll absolutely be a extra formal conclusion to the saga. Fortunately, quite a few CEOs concerned within the negotiations, together with Stratasys CEO Yoav Zeif and Desktop Steel CEO Ric Fulop, will likely be presenting on the present.

Characteristic picture courtesy of Tuan TranPham.