Two notable events transpired this week in the ongoing corporate battle between Stratasys and Nano Dimension.
The latter company aims to take over industry giant Stratasys by purchasing all outstanding shares with cash. Nano Dimension has now made three offers to the Stratasys board, with each subsequent offer raising the payment by a dollar a share.
Stratasys’ board politely (and unanimously) rejected the first and second offers, and in the last couple of days, they issued another polite press release, once again rejecting the third offer from Nano Dimension.
Nano Dimension’s Pursuit to Take Over Stratasys
Stratasys’ reasons for rejection include their belief that the offer is far too low, a view shared by many analysts and industry observers. In addition, Stratasys cited an ongoing court battle involving Nano Dimension and, in particular, its management. Stratasys believes Nano Dimension is in no condition to undertake massive takeover projects while a major court case is underway that could potentially change their management.
The court case was brought forth by several Nano Dimension shareholders, who were distressed with the company’s management decision to spend the company’s US$1.1B cash hoard on acquisitions. So far, Nano Dimension has acquired a couple of smaller companies, including Admatec, and then set their sights on Stratasys.
The shareholders apparently lack confidence in Nano Dimension’s management and thus believe their investment cash could be wasted on unsuccessful acquisitions. This is a significant reason why Nano Dimension’s current valuation is incredibly only half of their on-hand cash. How can a company be worth less than what’s in their bank account? This is a potent signal that investors believe acquisition investments of that cash will ultimately be worthless.
Court Rulings, Investor Confidence, and Future Prospects
Hence the lawsuit, which sought to replace multiple directors of the company and, in particular, the current CEO, Yoav Stern.
Yesterday, the Israeli court ruled on the matter. The ruling allows the current directors and management of Nano Dimension to continue in their roles, at least until the company’s next annual general meeting. At that AGM, it is possible the directors could change if company shareholders vote in that direction.
The ruling also required the appointment of two independent observers, suggesting that the court feels that something may not be quite right, despite the legality of leaving the existing board and management in place. The observers will have to abide by Nano Dimension’s non-disclosure policies, like any company insider. Nano Dimension stated they would appeal this portion of the ruling. Evidently, they do not want observers.
The court ruling does clear up one big issue in this corporate saga: we know who will run Nano Dimension, at least until their next annual meeting.
It does not clear up the Stratasys acquisition, however. It is abundantly clear that the Stratasys board of directors and management have no interest in a deal with Nano Dimension. This is unsurprising, given the ongoing near-daily accusatory YouTube videos published by Nano Dimension’s CEO.
With the latest offer rejection, Nano Dimension might be at a crossroads: the offer basically was the majority of their cash hoard, and it seems unlikely they could generate additional cash from third parties, given the incredibly low company valuation and evident distrust in Nano Dimension management.
It is possible that Nano Dimension could develop an alternative proposal that involves an exchange of shares between the two, but then Nano Dimension control of the company would be diluted, and company management would lose control of the board, just as the court case proposed. That seems unlikely to happen.
Nano Dimension previously stated that if the Stratasys board rejected their offer, they would simply appeal to individual Stratasys shareholders to sell their shares at the proposed offer level. However, given the board rejection, it is unlikely Stratasys shareholders would accept the offer.
This could be the end of the road for this particular takeover attempt. Perhaps Nano Dimension should instead target smaller companies and gradually build their business to gain investor confidence?