Stratasys
As was first revealed by Reuters, proxy advisory firm Institutional Shareholder Services (ISS) has recommended that Stratasys shareholders reject the proposed Desktop Metal merger, saying that the 3D Systems offer presents a “more convincing route to value creation."
ISS’s recommendation comes before the September 28 Extraordinary General Meeting of Shareholders (EGM) at which the shareholders will vote on the Desktop Metal merger. Desktop Metal shareholders are also set to vote on the deal on the same date in a separate meeting.
3D Systems says the 9-page ISS analysis concluded: "It is not clear that it [the Desktop Metal merger] creates value for SSYS shareholders. DDD’s alternative offer to acquire [Stratasys], by contrast, presents a more convincing route to value creation for SSYS shareholders."
In a report to Stratasys shareholders published on September 20, 2023, ISS presented the question: "Which player is best suited to drive consolidation in the struggling 3D printing industry, and which combination offers the most favourable terms for SSYS shareholders."
Representatives for Stratasys did not immediately respond to a request for comment by Reuters.
ISS said that as the share prices of Stratasys, Desktop Metal and 3D Systems have dropped in the last 12 months, it argues that the 3D Systems cash and stock offer for Stratasys “holds out an important hedge against further declines.”
3D Systems says that the ISS analysis found that its offer presents Stratasys with a 'clear path to scale' and the 'most favourable' terms possible to create significant value for Stratasys shareholders, when compared to the proposed transaction with Desktop Metal.
3D Systems says that it supports the recommendation from ISS, saying that it emphasises points raised by the company to the market in relation to maintaining and increasing value for shareholders of the proposed combined company.
3D Systems highlighted three key issues 'brought to light' by the ISS report:
Issue 1: 3D Systems’ Offer for Stratasys Creates Clear Value for Stratasys Shareholders, While a Transaction with Desktop Metal Does Not
“While the proposed [DM] transaction does not appear to be value-destructive, it is not clear that it creates value for SSYS shareholders. DDD's alternative offer to acquire the company, by contrast, presents a more convincing route to value creation for SSYS shareholders. Market reaction to the proposed transaction was negative; reaction to all public DDD offers has been positive, at least prior to rejection by SSYS.”
Issue 2: Stratasys’ Engagement with 3D Systems Was Highly Unusual
"Shareholders can reasonably question the unusual turn of events following SSYS' determination that DDD's proposal may result in a ‘superior proposal.’…It is reasonable for shareholders to expect that a determination that the DDD proposal constituted a superior offer could soon follow the SSYS board's statement that such an outcome could reasonably be expected. It is unusual for a "superior proposal" determination not to follow an earlier statement that a superior proposal would reasonably be expected.”
Issue 3: Stratasys’ Current Management Seems More Interested in Self Preservation Than Delivering Shareholder Value
“Criticism of DDD management and concern about post-management roles for SSYS management, while possibly justified to some extent, may suggest that unsatisfactory post-transaction roles for its management could have been a reason that SSYS did not ultimately deem DDD's proposal a superior proposal. In any case, shareholders should expect that transaction negotiations should first focus on a joint plan to create shareholder value through a transaction, and only after such plan had been agreed upon by the parties, to begin discussions about which individuals are best suited to execute such a plan.”
The Stratasys merger with Desktop Metal was announced on May 25, 2023, with the deal creating a proposed combined company worth 1.8 billion USD. The latest 3D Systems bid, submitted to Stratasys on September 6, offered 7 USD per share in cash and ownership of 46% of the aggregate shares of the combined company.
3D Systems believes this latest offer to be worth 27 USD per share to Stratasys shareholders inclusive of synergies. This would make the deal worth approximately 1.87 billion USD. After the announcement of the latest bid from 3D Systems, Stratasys terminated discussions with the company.
Stratasys’ largest shareholder Nano Dimension, with 14.1% of the ordinary shares of the company, announced its intention to vote against the Desktop Metal merger following the termination of negotiations between 3D Systems and Stratasys. Nano Dimension also had multiple takeover bids for Stratasys rejected earlier in 2023.
On the other side of the story, Institutional Shareholder Services recommended that Desktop Metal shareholders vote "FOR" the merger with Stratasys, saying: "Given the opportunity to become part of a larger entity, the potential cost synergies of the proposed combination, and the share form of consideration, which enables DM shareholders to participate in the upside of the combined company, support for the transaction is warranted.”
Read more:
A complete timeline of the Stratasys + Nano Dimension + Desktop Metal + 3D Systems story (so far)
Stratasys and Desktop Metal to merge in deal worth $1.8 billion
TCT Interview – Stratasys CEO Yoav Zeif details the strategy behind Desktop Metal merger
Stratasys to enter discussions with 3D Systems despite Desktop Metal merger agreement
Stratasys terminates talks with 3D Systems after revised proposal worth $27 per share
Stratasys’ largest shareholder Nano Dimension to vote against Desktop Metal merger
