Stratasys to merge with Desktop Metal

Stratasys, one of the largest developers of 3D printing technology, has announced a deal to merge with another 3D printer vendor, Desktop Metal with the boards of directors of both companies fully signed up. 

Stratasys has a broad portfolio of different 3D printing technologies, mainly concentrated around various types of plastic or polymer materials. The company has talked about developing metal printing capabilities but not yet commercialised any of this. So buying Desktop Metal plugs the metal printing gap in Stratasys’ line up and gives it access to a different type of industrial customer base.

The deal itself is a straightforward exchange of stocks which values the combined company at $1.8 billion. Desktop Metal stockholders will receive 0.123 ordinary shares of Stratasys for each share of Desktop Metal Class A common stock, which equates to roughly $1.88 per share based on Stratasys share price of $15.26 at the close of May 23, 2023. 

The deal is expected to be finalised in the fourth quarter of 2023 and at that point the existing Stratasys shareholders will own approximately 59 percent of the combined company while the former Desktop Metal stockholders will own roughly 41 percent of the combined company, in each case, on a fully diluted basis.

Together, the two companies will be able to offer end to end solutions from designing, prototyping and tooling to mass production and aftermarket operations across the entire manufacturing lifecycle. The combined entity will have over 27,000 industrial customers, a significant customer base across industries, materials and applications and the accompanying recurring revenue from consumables. When the deal closes, the combined company will earn more than 50 percent of its revenue from end-use-parts manufacturing and mass production, which has long been the holy grail of additive manufacturing and is only just starting to be realised. 

Dr Yoav Zeif, CEO of Stratasys, commented: “The combination with Desktop Metal will accelerate our growth trajectory by uniting two leaders to create a premier global provider of industrial additive manufacturing solutions. With attractive positions across complementary product offerings, including aerospace, automotive, consumer products, healthcare and dental, as well as one of the largest and most experienced R&D teams, industry-leading go-to-market infrastructure and a robust balance sheet, the combined company will be committed to delivering ongoing innovation while providing outstanding service to customers.”

The two companies believe that together they will be able to generate revenues of $1.1 billion in 2025. The hope is that bringing the two operations together will save some $50 million in additional annual run-rate cost synergies by 2025, due primarily to cost reductions in sales, general and administrative expenses, supply chain management and optimization of operational processes. At the same time, the combined company should be able to realise a further $50 million in revenues from enhanced market access.

Zeif added: “We look forward to building on the complementary strengths of the combined business and leveraging the strong brand equity across the portfolio to deliver enhanced value to shareholders, customers and employees.”

Once the deal has finalised, there will be a new board of 11 directors, with five of these selected by Stratasys and five selected by Desktop Metal, plus Dr Zeif as CEO. Ric Fulop, the co-founder, Chairman and CEO of Desktop Metal, will be the Chairman of the Board while Dov Ofer, currently Stratasys’ Chairman, will be the lead independent director of the combined company.

Fulop commented: “The combination of these two great companies marks a turning point in driving the next phase of additive manufacturing for mass production. We are excited to complement our portfolio of production metal, sand, ceramic and dental 3D printing solutions with Stratasys’ polymer offerings. Together, we will strive to build an even more resilient offering with a diversified customer base across industries and applications in order to drive long-term sustainable growth.”

He concluded: “We look forward to combining with Stratasys to deliver profitability while driving further innovation for a larger customer base and providing expanded opportunities for our employees.”

Desktop Metal had been on somewhat of an acquisition spree, having bought a number of companies including EnvisionTec, ExOne and Aerosint, but its plans appear to stall and the company announced a $50 million cost reduction plan for this year. The company had already laid off 12 percent of its workforce in June 2022 and in January 2023 it announced that a further 15 percent of its staff would also be made redundant.

This deal also has the effect of increasing the value of Stratasys which could finally put it beyond the reach of Nano Dimension, the Israeli company that has made several aggressive and unwanted offers to buy Stratasys already this year. Indeed, last week Nano Dimension made a new offer of $18 per share just before the merger with Desktop Metal was announced at the end of last week. Not surprisingly, Stratasys has just rejected this deal, saying that it significantly undervalued the company and failed to take into account the added value of the merger with Desktop Metal. Nonetheless, Nano Dimension appears determined to push ahead in its efforts to increase its own shareholding in Stratasys from its current level of approximately 14.2 percent.

Meanwhile, Stratasys and Desktop Metal have been quietly negotiating this deal for some time now behind the scenes so that it has emerged into the sunlight more or less full formed, even down to having its own website up and running. Zeif told an investor call: “We believe in this transaction. Nothing here is an accident. We’ve been working on this deal for more than a year.”

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