The Donerail Group LP, an funding firm that owns roughly 2.3% of the excellent shares in Stratasys, has printed a letter questioning the strategic and monetary deserves of the pending Desktop Steel merger.
Stratasys introduced in Could an settlement to merge with Desktop Steel, with shareholders of the previous proudly owning round 59% of the mixed firm and shareholders of the latter proudly owning the opposite 41%. Since that deal was introduced, 3D Methods has made public a number of affords to merge with Stratasys as a substitute – a deal which the Donerail Group believes is ‘moderately more likely to result in a superior proposal.’
The Donerail Group states in its letter to Stratasys that a number of personal conferences have been held with the Stratasys administration group, however the newest assembly held final week ‘launched a heightened stage of concern relating to the Firm’s governance and strategic route.’
“Most particularly,” the letter reads, “we’ve got issues relating to the Board’s clear, unconscionable, and continued refusal to have interaction with bona fide suitors relating to a sale of the Firm over the previous two years. Such fiduciary negligence must be rectified instantly.”
Per a regulatory submitting disclosed by Stratasys on June twentieth, 2023, the corporate has knocked again 12 unsolicited acquisition proposals from at the very least three ‘bona fide’ acquirers since January 2021. The Donerail Group claims that Stratasys rejected 11 out of 12 proposals with out engagement, whereas additionally suggesting that one proposal exceeded over 60% from the buying and selling worth on the time of the supply. “Such blind and inconceivable rejections have value Stratasys shareholders dearly,” the Donerail Group letter reads.
The letter goes onto state that Desktop Steel’s March 2023 proposal to amass Stratasys ‘was the bottom of all different unsolicited affords’ and ‘subsequently ended not in a sale of SSYS, however fairly, what has changed into a extremely dangerous bet-the-company merger for Stratasys.’ The Donerail Group additionally highlights that ‘the deal has not been well-received by the funding neighborhood,’ mentioning a major worth drop in Stratasys shares when the deal has introduced. Its letter to Stratasys additionally outlines that the Donerail Group believes 3D Methods most up-to-date supply – introduced on June 27 – to be ‘considerably extra compelling’ than present alternate options. The letter ‘applauds’ the Stratasys Board for confirming it’ll evaluate this supply and encourages ‘a swift evaluate forward of partaking immediately’ with 3D Methods.
Concluding, the letter reads: “After two years of rebuffing prepared suitors, we implore the Board to be particularly conscious of its fiduciary obligations to shareholders, fairly than have an inflated view of an execution story wrought with challenges. The right reply is obvious in our view. We hope that no additional motion past this letter will probably be wanted and totally count on the Board to be correctly suggested on proceed. We’re standing by and open for communication at any time with the Board, administration group, or any shareholder.”
The Donerail Group’s letter could be learn in its entirety under:
Stratasys Ltd.
1 Holtzman Avenue
Science Park, P.O. Field 2496
Rehovot, Israel 76124
To the Board of Administrators,
As you’re conscious, The Donerail Group LP (along with its associates, “Donerail”, or “we”) is a big shareholder of Stratasys Ltd. (the “Firm”, “Stratasys”, or “SSYS”) with a helpful possession curiosity of roughly 2.3% of the Firm’s excellent shares.
As you’re additionally conscious, since our assembly final week with the Stratasys CEO, Dr. Yoav Zeif, we’ve got tried on a number of events to name a personal assembly with the members of the Board of Administrators (the “Board”) chargeable for strategic initiatives to spotlight our views of worth of the assorted strategic choices. Our assembly requests have been categorically ignored, main us to launch this letter publicly.
To make certain, we’ve got appreciated the conferences with members of the Stratasys administration group in current weeks, however we’ve got discovered that our most up-to-date assembly, alongside sure particulars disclosed lately in regulatory filings, have launched a heightened stage of concern relating to the Firm’s governance and strategic route.
Most particularly, we’ve got issues relating to the Board’s clear, unconscionable, and continued refusal to have interaction with bona fide suitors relating to a sale of the Firm over the previous two years. Such fiduciary negligence must be rectified instantly.
Because the Firm disclosed in a June twentieth regulatory submitting, since January of 2021, Stratasys has been on the receiving finish of at the very least 12 unsolicited acquisition proposals from at the very least 3 separate bona fide acquirers. We additionally consider that the Board would obtain extra acquisition curiosity if it could point out a willingness to significantly entertain it. Implied acquisition premiums of the disclosed 12 unsolicited acquisition proposals have been engaging, with one proposal exceeding over 60% from the buying and selling worth on the time of the supply. In 11 of these 12 unsolicited acquisition proposals, Stratasys rejected the unsolicited proposal with out engagement. Such blind and inconceivable rejections have value Stratasys shareholders dearly.
Within the one unsolicited acquisition supply that was fabricated from which the Board did, in truth, interact upon – the March 2023 Desktop Steel Included (“Desktop Steel”) proposal – the premium provided was the bottom of all different unsolicited affords and subsequently ended not in a sale of SSYS, however fairly, what has changed into a extremely dangerous bet-the-company merger for Stratasys.
To say the least, the Desktop Steel deal has not been well-received by the funding neighborhood. Stratasys shares dropped 10% instantly upon the news1, and the funding analyst neighborhood instantly got here out criticizing the transaction as a consequence of the truth that “SSYS can be absorbing an unprofitable enterprise (DM) that has dramatically missed practically all of its monetary forecasts” and explicitly highlighting disbelief relating to the 2024-26 monetary forecasts2.
In our June twenty first assembly with Dr. Zeif, we requested pointed questions relating to the historic want of SSYS to rebuff prepared bidders at objectively engaging costs, and Dr. Zeif confirmed to us that however historic actions, the Board was now “working for shareholders”, that he “understood our views”, and that the Board would “do the fitting factor” for shareholders.
Tuesday morning, we watched with nice curiosity as two separate, engaging, unsolicited affords had been offered to Stratasys shareholders – one in all which objectively serves as a extremely engaging various for SSYS shareholders to the Desktop Steel proposed transaction. In actual fact, we believed that the prior 3D Methods Company’s (“3D Methods”) supply – and their probably potential to extend their bid – was sufficiently compelling to warrant engagement with them vis-à-vis the Desktop Steel proposed transaction’s worth provided and exactly the valuation work that we had endeavored to spotlight to the Board in a gathering – a request that was, once more, rejected. Because it stands right now, 3D Methods’ revised, elevated proposal affords SSYS shareholders a mixture with a extremely complementary strategic celebration in a money and inventory deal valuing Stratasys at an over 27% premium to Monday’s closing buying and selling worth. We don’t consider that the Board can reject the apparent any longer: a 3D Methods transaction is considerably extra compelling than the present alternate options and warrants fast engagement.
We applaud the Board for its fast dedication to evaluate the revised merger proposal from 3D Methods, because it introduced Tuesday, and we encourage a swift evaluate forward of partaking immediately with 3D Methods to optimize its supply to Stratasys shareholders.
Critically, as we mentioned at size with Dr. Zeif on June twenty first, the Board was clever to incorporate language in its Desktop Steel merger settlement that permits the Board to have interaction with an unsolicited suitor within the occasion {that a} proposal is made that’s “moderately more likely to result in” a superior supply. 3D Methods’ renewed proposal clearly marks such a proposal, and we’d encourage the Board to behave in its capability as fiduciaries to barter and announce a transaction.
On this occasion, we encourage the Board to comply with its dedication to “work for shareholders” and terminate the Desktop Steel deal in favor of a extra engaging deal.
After 2 years of rebuffing prepared suitors, we implore the Board to be particularly conscious of its fiduciary obligations to shareholders, fairly than have an inflated view of an execution story wrought with challenges. The right reply is obvious in our view.
We hope that no additional motion past this letter will probably be wanted and totally count on the Board to be correctly suggested on proceed. We’re standing by and open for communication at any time with the Board, administration group, or any shareholder.
William Z. Wyatt
Managing Companion
The Donerail Group LP
Stratasys’ largest single shareholder has additionally been making strikes to disrupt the deliberate merger with Desktop Steel, making a number of makes an attempt to show its 14% of shares into 50+% – most lately by way of a young supply of 20.05 per excellent share. Nano Dimension acquired 12% of Stratasys’ shares final 12 months, and although initially taking part in down the concept of accelerating that funding, has sought to achieve management over the corporate in current months.
