There have been a series of important developments in the ongoing Stratasys – Nano Dimension battle.
Nano Dimension, Stratasys and Desktop Metal Background
As background, Nano Dimension, a company with a large cash hoard of US$1B, had intentions of taking over Stratasys by acquiring all or some of the 85.6% of shares they don’t already own. They’ve issued a series of bids to the Stratasys board for consideration, which have all been rejected.
Meanwhile, Stratasys announced a massive merger with Desktop Metal, which would create the largest company in the 3D print space. The combined company would control a huge number of 3D print processes, and apparently would own some 3400 patents.
Nano Dimension’s Latest Bid: Rejected
Nano Dimension’s latest bid evidently arrived just before the merger announcement. Unlike prior bids that attempted to buy all Stratasys shares, the latest bid merely attempted to own just over 50% of shares to gain control of the company, with a weirdly lower price per share than had previously been offered for all shares.
As expected, Stratasys politely rejected the latest offer earlier this week. Unlike prior rejections, Stratasys emphasized a number of very sensible and accurate reasons for the rejection, including:
- “Nano’s partial offer is inadequate and substantially undervalues Stratasys’ industry-leading position and growth opportunities, which are even larger in light of the pending merger with Desktop Metal”, which should produce a well-capitalized and profitable enterprise set for major growth in the next several years;
- “Nano’s partial offer is highly opportunistic” due to a lowered per-share price as compared to prior offers;
- “Nano’s campaign is of questionable legal authority and poses significant risks to Stratasys and its shareholders” due to an ongoing legal dispute between Nano Dimension management and its major shareholders. The lawsuit may result in removal of the current Nano Dimension management team, which would very likely change Nano Dimension’s acquisition strategy;
- “Nano’s management team has demonstrated a disregard for shareholder value through its history of value-destructive behavior and is ill-equipped to successfully operate a global business at the scale of Stratasys”, an aggressive statement that seems accurate given Nano Dimension’s recent behavior;
- “An acquisition by Nano of a majority of the outstanding Stratasys ordinary shares would result in adverse consequences for Stratasys and the remaining shareholders”, which also seems true given Stratasys’ financial logic;
- “Nano’s partial offer is highly conditional and may never be consummated”, which may be true, however, we don’t know the nature of the conditions.
With these strong statements, Stratasys is no longer fooling around and clearly wants these unsolicited bids to end. Further, they’ve asked their existing shareholders to each file a “Notice of Objection against the offer” with their broker.
The matter is so concerning to Stratasys that they’ve issued a lengthy 72-page highly detailed explanation of the situation from their point of view. You can read the PDF report here.
Desktop Metal Shareholder Rights Plan
Meanwhile, Desktop Metal, still an independent company, has taken an important move of their own. They’ve instituted a special “Limited
Duration Shareholder Rights Plan”, which seems intended to counter potential actions from Nano Dimension. They explain:
“The rights plan will guard against open market accumulations and other coercive tactics aimed at gaining control of the Company without paying all shareholders a full control premium for their shares. The rights plan will not prevent any person from making a superior proposal pursuant to the terms of the merger agreement.”
Basically the plan involves providing existing shareholders the ability to acquire special preferred stock to block a takeover by another entity, such as Nano Dimension. The plan expires in a few weeks, suggesting that after that period the danger of a takeover will be moot.
Evidently the folks at Stratasys and Desktop Metal are undertaking multiple actions to ensure their planned merger takes place without unwanted interference from Nano Dimension.
After the merger it would be difficult to imagine Nano Dimension being able to mount another takeover attempt. While Nano Dimension currently holds about 14.5% of Stratasys stock, this will be diluted notably after the merger. It would then require substantially more dollars for Nano Dimension to gain control over the much larger Stratasys.
Should Nano Dimension’s latest bid to takeover Stratasys succeed, then the Desktop Metal merger proposal would likely evaporate and all the potential value from that deal would similarly disappear. I’m not at all surprised Stratasys and Desktop Metal are taking these actions.
With these moves by both Stratasys and Desktop metal, we could finally see the end of the Nano Dimension takeover campaign.