There have been a number of important developments in the Stratasys acquisition saga this week. Let’s review what’s going on.
As Fabbaloo readers may recall, there has been an ongoing corporate struggle to take control of Stratasys, currently the largest player in the 3D print space, according to our weekly leaderboard.
After Stratasys announced a merger agreement with Desktop Metal, rival 3D printer manufacturer Nano Dimension launched a series of bids to instead take over Stratasys before the merger took place. This is likely because after the merger, Nano Dimension could not afford to buy the larger merged company.
While Stratasys rejected all of Nano Dimension’s bids, 3D Systems, the other large player in the 3D print space, entered the battle with takeover bids of their own. These were also rejected, until the last one about a month ago. The two parties then went silent for several weeks as they evaluated the proposal.
Then, this week Stratasys officially rejected the 3D Systems offer, mainly because Stratasys’ value has soared, while 3D Systems’ value has decreased substantially, making their offer far less valuable. This chart shows Stratasys’ analysis of the offer’s value over time:
Meanwhile, the Desktop Metal merger agreement is still in force, and it all depends on a vote by Stratasys shareholders on September 28. What do all these players have to say about this?
Stratasys issued a press release strongly urging shareholders to accept the Desktop Metal merger agreement. If the shareholders vote positively, then the merger will proceed. If they don’t, then it won’t.
3D Systems submitted yet another offer to Stratasys with some interesting timing. It’s a binding offer, meaning Stratasys needs only to sign it and it’s done. The offer is set to expire five days after the Desktop Metal merger shareholder vote. This means that Stratasys execs will have that much time to decide on the deal, should the vote fail. On the other hand, the vote might succeed, and the 3D Systems offer is moot.
Nano Dimension turns out to be a major shareholder in Stratasys, and issued a strong message urging other Stratasys shareholders to reject the Desktop Metal merger proposal. They also said they would be voting against the proposal with their 14.5% of Stratasys shares.
Both suitors seem quite aggressive and wish to see the Desktop Metal deal die. Why is this so?
Aside from the “serious concerns” expressed vigorously by both companies in their recent press releases, I suspect there’s something else at play here.
Should the merger proceed, the resulting company will be substantially larger by simple arithmetic. That merged company would certainly be far too large for Nano Dimension to afford, as their percentage of shares will be diluted by the merger. I suspect Nano Dimension wants to keep Stratasys small to maintain some possibility of a future takeover.
3D Systems I suspect is thinking much the same. After the merger a Stratasys takeover would be more expensive for them, although they could likely afford to do so. It would be in 3D Systems’ interest to keep Stratasys at a smaller size as well. On the other hand, it could have something to do with the recent announcement from Align, one of 3D Systems major customers, that they would be considering other 3D printing systems. Some investors believe that could take a chunk out of 3D Systems’ future revenue, and an acquisition of Stratasys might diversify their earnings going forward.
For Stratasys, a merged company would be larger and thus have a different position in such negotiations. In fact, it may be they could become the buyers and the others the bought.
3D Systems indicated there could be up to US$100M annual savings if they merged with Stratasys. However, if Desktop Metal, Stratasys and 3D Systems were all put together somehow, the savings would be significantly greater.
That might be the eventual outcome of this titanic corporate battle.