Thoughts on the Nikon – SLM Systems Acquisition

Nikon is set to acquire metal 3D printer manufacturer SLM Solutions, but what are the implications?

In a surprise announcement after market close last week, SLM Solutions and Japan-based Nikon revealed the latter party has offered SLM Solutions shareholders a significant premium to sell their shares to Nikon. The amount is so significant it is near certain a majority of SLM Solutions shareholders will agree to sell. In fact, SLM Solutions said:

“Nikon has obtained binding commitments from SLM’s key shareholders Elliott Advisors UK Limited (Cornwall), ENA Investment Capital and SLM’s founder Hans J. Ihde to support the transaction by way of irrevocable tender commitments comprising shares and all SLM convertibles bond securities to held.”

In other words, this is basically a done deal, with all but the paperwork done.

The official offer and sales will occur in late September and October, so by the end of the year SLM Solutions will be a Nikon company.

But what is Nikon, and why would they consider buying SLM Solutions?

You’re probably familiar with Nikon’s consumer line of products, including their flagship camera systems. But in addition to those products, Nikon is a huge producer of industrial equipment, much of which is based on optical technology. According to Wikipedia:

“Nikon’s products include cameras, camera lenses, binoculars, microscopes, ophthalmic lenses, measurement instruments, rifle scopes, spotting scopes, and the steppers used in the photolithography steps of semiconductor fabrication, of which it is the world’s second largest manufacturer. The company is the eighth-largest chip equipment maker as reported in 2017. Also, it has diversified into new areas like 3D printing and regenerative medicine to compensate for the shrinking digital camera market.”

Nikon CEO Toshikazu Umatate said:

“By acquiring SLM Solutions, Nikon is taking an important step towards our Vision 2030. We are focused on digital manufacturing as a growth driver and will create value through the promising market of metal additive manufacturing for our stakeholders. 3D Printing will revolutionize mass-production by enabling our clients to manufacture highly complex parts, reduce cycle time, carbon emissions, energy costs and waste. Nikon and SLM Solutions share the vision that our technology-driven innovation will transform the future of manufacturing. This acquisition will be key to growing our digital manufacturing business.”

It may be that Nikon views their current optical businesses as limited or saturated in the future, and wishes to open up an entirely new line of business: digital manufacturing. However, if you read their Vision 2030 presentation, you’ll see they have some rather intriguing views of how the future will unfold. They say:

“With advances in technology, great change (a “megashift”) is expected to take place in society by 2030.

Nikon will identify the diverse needs of society this produces, and stay ahead of the curve, contributing to society in two fields of value proposition.”

Nikon listed a number of changes they predict to occur by that date, which are both bold and dramatic:

“Looking ahead to society in 2030, broadly speaking, we believe there will be an acceleration in the technology shift that will achieve the further evolution and enhancement of engineering and machines.

The acceleration of initiatives to address society’s challenges, such as climate change and natural resource shortages, will result in a shift in social frameworks. The advancement of the quality of life-enhancing entertainment and the evolution of medical care will bring a shift in how we view life and our lifestyles.

We anticipate the shift and diversification in values from owning to sharing.

As a result of these megashifts, we believe that people will focus more on the pursuit of self-expression and value, and that co-creation by humans and machines will play a more important role than ever before.”

At this stage there is sufficient evidence to believe that there could be a growing shift to additive manufacturing by manufacturers, based on the results seen in several industries, as Nikon believes. As the pricing of AM equipment and materials continues to drop, more industries will surely follow. In other words, the AM pie will grow, and Nikon wants a piece of it.

This type of move is not unprecedented. Other non-3D print companies have acquired or developed technology to quickly get them into the AM game, like Xerox acquiring Vader Systems, GE acquiring Concept Laser & ARCAM, or Ricoh producing SLS equipment. All these big players see up and coming operations in the 3D print space and want to ride along.

In fact, at one point GE almost acquired SLM Solutions!

But why Nikon and why SLM Solutions? Aside from the stated goal of building a digital manufacturing business, there are some interesting technological overlays.

SLM Solutions’ LPBF technology makes heavy use of lasers — and optical system — in their equipment. The largest device they produce, the NXG XII 600 uses an astounding twelve powerful lasers to build metal parts at great speed through parallel operation.

One wonders what optical magic Nikon may bring to the SLM Solutions party? Some ideas:

• Increasing the effective power and efficiency of the lasers
• Increasing the print quality and reliability through more precise optics
• Organizing precision “hand offs” between laser zones in the build volume
• Increasing the build volume through advanced optics that could allow laser energy to travel farther with accuracy

And so on. There are a dozen or more possible technology areas where Nikon could bring benefits to SLM Solutions.

For SLM Solutions shareholders, this is an amazing deal: it almost doubles their current investments without having to do anything. There is no reason why they shouldn’t sell.

That is, unless they believe Nikon will be able to build SLM Solutions’ business much, much larger than it is today. If that happens, then their shares could be worth a lot more, more than this acquisition deal proposes.

SLM Solutions will benefit with not only the infusion of complimentary technologies, but also simply from Nikon’s cash reserves. This could dramatically increase R&D done by the company, or increase the marketing and sales.

Nikon also brings their sales and distribution networks to the table, where SLM Solutions products will no doubt appear for sale to an entirely new group of potential customers.

That alone will boost SLM Solutions’ sales, and it may be that Nikon knows that boost could raise the company’s value by — 75%?

SLM Solutions is just the latest of several metal 3D print manufacturers that has been acquired by larger parties. Some have been successful, some not so much. Let’s come back in a year or two and see what happened.

Via SLM Solutions