As much as we’d like to write about something else, there have been yet more significant developments in the Stratasys takeover saga.
Readers may recall that Stratasys, currently the largest publicly-traded 3D print company according to our weekly leaderboard, has been undergoing a series of gradually increasing takeover bids from Nano Dimension and later 3D Systems.
Meanwhile, Stratasys had organized a merger with Desktop Metal that has been agreed to — but has not yet been closed. In retrospect, it may be that Stratasys developed this merger with Desktop Metal to force the issue: a combined Desktop Metal and Stratasys company might have been too large for other bidders to consider. The fact that there is a window open before the merger closes has caused some urgency among the other bidders, who have been stepping on each other to up the bids. That’s good news for Stratasys shareholders. The waiting game seems to be working.
That’s been the pattern for the last couple of months, but now things may be changing.
Last week both Nano Dimension and 3D Systems issued new bids, significantly raising their value in an attempt to entice Stratasys shareholders to sell their shares.
Stratasys issued two press releases on these bids.
As usual, they strictly rejected the Nano Dimension bid, as it is clearly of questionable value for a number of reasons. The Stratasys board has consistently dismissed the repeated Nano Dimension bids in a formal manner.
Then, it was expected they’d issue a similar rejection of the latest 3D Systems bid, as they have done several times for prior bids. Keep the bids rising, apparently.
Except that’s not what happened.
Instead, Stratasys issued a very curious press release saying the latest 3D Systems offer:
“would reasonably be expected to result in a “Superior Proposal” as defined in Stratasys’ merger agreement with Desktop Metal, Inc. (NYSE: DM) (“Desktop Metal”).”
Let’s unpack this a bit. Recall the Desktop Metal merger mentioned above. This wasn’t a handshake; it was a very formal contract between the parties to execute the merger at a future date. The contract undoubtedly also included words describing how the agreement could be stopped. That wording must have included the phrase “Superior Proposal”. That could legally enable Stratasys to work with other parties, as per the contract terms.
And why not? Why not include a clause that allows Stratasys to run away to somewhere else if they received a better offer?
Why would Desktop Metal agree to such a clause? It’s because if that happened, Desktop Metal would then be awarded a penalty fee according to the contract. Normally, penalty fees are pretty high, meaning the “superior deal” must be “extra superior” to account for those fees.
However, 3D Systems’ latest takeover proposal also included the offer to pay for any penalty fees to dismiss the Desktop Metal merger deal. I believe that may have turned the tide here, and caused Stratasys to begin looking very hard at the 3D Systems proposal.
What happens next?
First, Stratasys must continue to deal with the ongoing proposal from Nano Dimension, which could scuttle the much larger 3D Systems deal if Stratasys shareholders accepted Nano Dimension’s offer. However, at this point it seems pretty clear that a deal with 3D Systems would indeed be far superior to any arrangement with Nano Dimension.
Secondly, Stratasys and 3D Systems will almost certainly set up ongoing negotiations in a back room to refine the deal. It’s likely they will try to push more value from the deal for Stratasys shareholders, and if so, we may see the two companies join together in the near future.
Meanwhile, Stratasys covers the rest of the bases with this statement:
“Stratasys remains bound by the terms of the Desktop Metal merger agreement. Stratasys’ Board has not determined that 3D Systems’ July 13, 2023 revised proposal in fact constitutes a Superior Proposal as defined in the merger agreement with Desktop Metal, and the Stratasys Board has not changed its unanimous approval, recommendation and declaration of advisability of the transaction with Desktop Metal. Stratasys notes that there can be no assurance that the discussions with 3D Systems will result in a Superior Proposal, an agreement or a transaction.”
Last week I wrote about five possible outcomes of these ongoing corporate offers for Stratasys, with the most likely being a deal with 3D Systems. It seems that could be the case.