Stratasys Calls Extraordinary Meeting: What are the Implications?

Stratasys has called an Extraordinary Meeting of its shareholders, but what does that mean?

You may have seen the news from Stratasys about the scheduling of an “Extraordinary Meeting” of shareholders to take place on September 28th. That sounds dramatic, but it isn’t. Or is it? Let’s take a look at what’s going on here.

First, you have to understand how a company works. Each year the shareholders of a company have one, and only one opportunity to get directly involved. That takes place at the “Annual General Meeting”, where key proposals are voted upon by shareholders. Typically the proposals include the election of the board of directors.

The elected board of directors then meets, usually monthly or quarterly, to review the company’s operations and interface with the CEO. In fact, the board is the entity that recruits and hires the CEO. That’s basically their only job.

For shareholders, that’s about all they get to do: vote for board members once a year.

Unless a special “Annual General Meeting” is called in addition to the regular AGM. This is legally called an “Extraordinary Meeting” of shareholders. These are quite rare and are only called if there are serious matters to discuss that potentially alter company — and particularly — board of directors structure.

That’s what’s happening here.

As you may recall, Stratasys management struck an agreement with Desktop Metal management some months ago to perform a merger. The resulting merger would create the largest publicly traded 3D print company on the planet.

However, part of the agreement was to make a new board of directors composed of half Desktop Metal representatives and half Stratasys, plus the CEO of the merged company.

Company management cannot simply do this on their own; the shareholders decide who’s on and off the board of directors. Therefore, Stratasys has called an extraordinary meeting to gain permission from their shareholders for this move.

The proposals to be voted on in the extraordinary meeting include the board of director reconfiguration, as well as the stock movements between the companies that will precipitate the deal.

While this is “extraordinary”, it is also routine: this would have to have happened because of the agreement. It’s likely Stratasys shareholders will approve of the deal.

So far, nothing too surprising here. But then…

Recall that after the merger was announced, Stratasys was then the target of numerous takeover bids, first from Nano Dimension, and then from 3D Systems, at the time the largest company in the space. Since the bids appeared, Stratasys’ valuation has risen above all others, even 3D Systems, the company that hopes to buy them.

While the Nano Dimension proposals were rejected, Stratasys and 3D Systems announced they are continuing to negotiate behind the scenes on a possible deal. Nothing concrete has since been announced, but we know the companies are talking.

Part of the 3D Systems proposal was to have Stratasys abandon the Desktop Metal deal, triggering a penalty fee to be paid by Stratasys. 3D Systems’ proposal included payment of that “break up” fee, so that they could acquire Stratasys only.

While Stratasys is obligated to proceed with the Desktop Metal merger, there is still the 3D Systems yet-to-be-announced proposal to come. Or not.

Possible outcomes:

• Talks with 3D Systems break down, and Stratasys proceeds with the Desktop Metal merger
• Talks with 3D Systems succeed and the Desktop Metal merger is abandoned, with Stratasys and 3D Systems merging
• Something else happens

That something else might be this: Stratasys drags out the 3D Systems negotiations long enough to complete the merger with Desktop Metal. Then they would be a much larger company and 3D Systems would then perhaps have to pay a higher premium to acquire Stratasys.

Or perhaps Stratasys might then acquire 3D Systems with the larger scale provided by the Desktop Metal merger.

As they say, excitement is guaranteed.

Via Stratasys