Stratasys + Desktop Metal
Stratasys and Desktop Metal have announced they have entered into a definitive agreement where the two companies will combine in an all-stock transaction valued at around 1.8 billion USD. The companies say the deal unites the polymer strengths of Stratasys with the complementary industrial mass production leadership of Desktop Metal’s brands.
The press release confirming the deal, which was first reported late in the night on Wednesday May 24, said that the combined company is expected to generate 1.1 billion in 2025 revenue, with ‘significant upside potential’ in a total addressable market of more than 100 billion by 2032.
The agreement, which has been unanimously approved by the Boards of Directors of both companies, will see Desktop Metal shareholders receive 0.123 ordinary shares of Stratasys for each share of Desktop Metal Class A common stock. This represents a value of approximately 1.88 USD per share of the Desktop Metal Class A common stock based on the closing price of a Stratasys ordinary share of 15.26 USD on May 23, 2023.
The transaction, which is expected to close in the fourth quarter of 2023, will see existing Stratasys shareholders own approximately 59% of the combined company, and legacy Desktop Metal stockholders will own approximately 41% of the company, in each case, on a fully diluted bases as stated in the press release.
“Today is an important day in Stratasys’ evolution,” said Dr. Yoav Zeif, CEO of Stratasys. “The combination with Desktop Metal will accelerate our growth trajectory by uniting two leaders to create a premier global provider of industrial additive manufacturing solutions. With attractive positions across complementary product offerings, including aerospace, automotive, consumer products, healthcare and dental, as well as one of the largest and most experienced R&D teams, industry-leading go-to-market infrastructure and a robust balance sheet, the combined company will be committed to delivering ongoing innovation while providing outstanding service to customers. We look forward to building on the complementary strengths of the combined business and leveraging the strong brand equity across the portfolio to deliver enhanced value to shareholders, customers and employees.”
“We believe this is a landmark moment for the additive manufacturing industry,” said Ric Fulop, Co- founder, Chairman and CEO of Desktop Metal. “The combination of these two great companies marks a turning point in driving the next phase of additive manufacturing for mass production. We are excited to complement our portfolio of production metal, sand, ceramic and dental 3D printing solutions with Stratasys’ polymer offerings. Together, we will strive to build an even more resilient offering with a diversified customer base across industries and applications in order to drive long-term sustainable growth. We look forward to combining with Stratasys to deliver profitability while driving further innovation for a larger customer base and providing expanded opportunities for our employees.”
In the joint press release, Stratasys and Desktop Metal said that the transaction brings together complementary IP portfolios with more than 3,400 patents and pending patent applications. The companies said that together they have invested over 500 million USD in R&D over the last four fiscal years, and that the combined company will have one of the largest R&D and engineering teams in the additive manufacturing industry with over 800 scientists and engineers.
The companies expect the combined brand to generate approximately 50 million USD in additional run-rate cost synergies by 2025, due to cost reductions in sales, general and administrative expenses, supply chain management and optimisation of operational processes. The two also expect the combined company to generate an additional 50 million USD in run-rate revenue synergies by 2025 from enhanced market access.
The combined company is targeting 10%-12% adjusted EBITDA margins in 2025. Together, Stratasys and Desktop Metal had 437 million USD of cash and cash equivalents as of the first quarter of 2023, and the companies say this transaction accelerates the combined company’s ‘financial flexibility’ through a ‘well-capitalised balance sheet’ to drive future growth.
Dr. Zeif will lead the combined company as Chief Executive Officer together will Mr. Fulop as the Chairman of the Board. Upon completion of the transaction, the combined company’s Board of Directors will be comprised of 11 members, five of whom will be selected by Stratasys, and five of whom will be selected by Desktop Metal, plus Dr. Zeif as CEO. Stratasys Chairman Dov Ofer will serve as lead independent director of the combined company.
The deal is expected to close in the fourth quarter of 2023, and is subject to customary closing conditions, including the approval of Stratasys shareholders and Desktop Metal’s stockholders, as well as the receipt of certain governmental and regulatory approvals.
READ MORE
- Stratasys & Desktop Metal: What we know so far
- 7 things we learned from Stratasys & Desktop Metal’s Joint Transaction Investors Call
- Nano Dimension commences special tender offer for Stratasys takeover as Desktop Metal business combination announcement
After the first report of the news was published by Bloomberg in the evening of May 24, shares in Desktop Metal rose around 17% in late trading, after closing on Wednesday 24 at a price of 1.75 USD, down 4.9% and a for market value of around 563 million USD. Stratasys, which had fallen 2.5% to 14.88 USD, for a market value of around 1 billion USD, dipped as much as 10% after the close of regular trading, according to Bloomberg.
Desktop Metal went public in 2020, after launching to market in 2017, with a value of up to 2.5 billion USD, which at the time made it the most valuable company in additive manufacturing ahead of Carbon, then valued at an estimated 2.4 billion USD.
Stratasys has been pushing back against a takeover attempt in 2023, with Nano Dimension submitting three bids all of over 1.1 billion in value, which have all been rejected. Nano Dimension also announced its preparedness to commence a special tender offer targeting at least 51% of remaining Stratasys shares, which it believed would not be able to be deterred by the Stratasys shareholder rights plan, or ‘poison pill’.
This took place in the midst of a power struggle within Nano Dimension itself, with shareholder Murchinson attempting to acquire the company.
Stratasys has extended its shareholder rights plan to the later date of July 24, 2023, and Desktop Metal has adopted a limited duration shareholder rights plan of its own in order to maximise shareholder value in the transaction. The companies say that the Desktop Metal shareholder rights plan, like the Stratasys rights plan, will 'not prevent any person from making a superior proposal pursuant to the terms of the merger agreement.'
The full joint statement from the companies about the merger can be found here.
