Stratasys Limited ( SSYS Quick Quote SSYS - Free Report) terminated its previously announced merger agreement with Desktop Metal, Inc. ( DM Quick Quote DM - Free Report) last week after shareholders rejected the deal at the Extraordinary General Meeting held on Sep 28.
Stratasys had announced that it entered into a definitive agreement with Desktop Metal to combine the two companies in an all-stock transaction valued at approximately $1.8 billion. However, the deal faced a strong backlash from shareholders, with approximately 79% voting against the transaction.
As a consequence of the failed merger deal, Stratasys will now have to reimburse Desktop Metal transaction-related expenses of up to $10 million. Moreover, it may have to cough up $32.5 million as a breakup fee if it enters into a merger or acquisition deal over the next 12 months.
Following management’s failed merger deal with Desktop Metal, Stratasys announced that it is committed to taking appropriate actions to maximize shareholders’ value. The company is now exploring alternatives that include a strategic transaction, merger, business combination or sale, which have the potential to enhance shareholders’ wealth.
Nano Dimension ( NNDM Quick Quote NNDM - Free Report) , one of the largest shareholders of the company with a stake of approximately 14.1%, had previously stated that it would vote against the merger deal with Desktop Metal. Nano Dimension has been in a bidding war to acquire Stratasys since late March 2023 and revised its offerings multiple times.
Nano Dimension’s last tender offer on Jul 18, 2023 valued Stratasys at $25 per share. However, due to Stratasys shareholders’ right plan imposition, the company did not receive adequate shares, and the tender offer got expired on Jul 31. After that, Nano Dimension decided to withdraw itself from the acquisition bidding war.
3D Systems ( DDD Quick Quote DDD - Free Report) is still in the acquisition race for Stratasys, and the company once again enhanced its proposal on Sep 11. Per the latest proposal, for each share of Stratasys, shareholders will receive $7 in cash and 1.6387 shares of the combined company.
3D Systems believes that its proposal is more favorable for Stratasys shareholders than the announced business combination with Desktop Metal. Talking about its revised bidding proposal, 3D Systems pointed out several benefits for shareholders as well as the combined company.
If management accepts 3D Systems’ proposal, apart from receiving instant cash benefits, Stratasys shareholders will get the share consideration on a tax-free basis. Furthermore, 3D Systems intends to fund the cash consideration from the pro forma balance sheet of the combined company, and hence, it will not be subject to any debt or equity financing conditions.
3D Systems claims that the acquisition of Stratasys will create cost synergies of at least $100 million through research and development integration, selling, general and administrative savings and the cost of goods sold optimization. The combined company is anticipated to generate revenues of $1.2 billion and an EBITDA margin of approximately 12%.
We believe that Stratasys’ strong long-term growth prospects make it a lucrative takeover target. SSYS has been scaling newer heights across all its business segments.
Also, Stratasys launched several innovative products, which position it well in the long term. Stratasys’ machines facilitate prototyping within a few hours, which reduces development time and upfront costs.
The 3D printing market presents a favorable long-term investment opportunity as a large number of engineers, designers, architects and entrepreneurs are resorting to 3D solutions for their primary designing and product modeling.