Stratasys has announced that it has terminated the merger agreement with Desktop Metal after its shareholders did not approve the deal in the September 28, 2023, Extraordinary General Meeting of Shareholders (EGM). The Stratasys Board of Directors says that, based on its preliminary count of the votes cast at the EGM, it has now initiated a process to explore strategic alternatives for the company.
Stratasys and Desktop Metal announced on May 25, 2023 that they had entered into a merger agreement to create a 1.8 billion USD 3D printing company.
The final, certified voting results for the Stratasys EGM will be provided in a Form 6-K to be furnished to the U.S. Securities and Exchange Commission (SEC), which the company expects to occur within four business days. It has been reported by numerous outlets, however, that 78.6% of Stratasys shareholders voted against the deal.
Stratasys says that the process to maximise shareholder value will begin immediately. The company says that potential strategic alternatives to be explored or evaluated may include, but are not limited to, a strategic transaction, potential merger, business combination or sale.
“We have decided to undertake a comprehensive and thorough review of all available strategic alternatives,” said Dov Ofer, Chairman of Stratasys’ Board of Directors. “We are entering this review as the leader in the additive manufacturing space and will continue to execute our strategy, powered by innovation and profitable growth, which has led Stratasys to outpace the competition. Importantly, we remain focused on our mission to deliver value to customers and are committed to taking the appropriate actions to maximise value for all Stratasys shareholders.”
The company says that there is no assurance that the strategic review process will result in any transaction or other strategic outcome. Stratasys says it does not intend to disclose further developments on its strategic review process unless and until it determines that such disclosure is appropriate or necessary.
INTERVIEW | Desktop Metal CEO Ric Fulop: "We'll remain an independent company. Desktop Metal is not for sale."
The Stratasys Board of Directors has unanimously adopted an amendment to Stratasys’ shareholder rights plan, pursuant to which the expiration date of the Rights Plan was extended for three months.
The company says the rights plan is not intended to prevent or interfere with any action with respect to Stratasys that the Board determines to be in the best interests of the company and its shareholders.
It says the plan will support the Boards ability to carry out the strategic review process and position the Board to fulfil its fiduciary duties on behalf of all shareholders by ensuring the Board is able to evaluate all options to maximise shareholder value, and preserve for shareholders the long-term value of the company in the event of a takeover or acquisition of a controlling stake without the payment of a control premium for all Stratasys ordinary shares.
On September 14, 2023, 3D Systems delivered a signed merger agreement to Stratasys, based on a deal which it said presents Stratasys shareholders with a ‘certain, superior alternative’ to the Desktop Metal merger. 3D Systems believes this deal to be worth 27 USD per Stratasys share.
Read more:
A complete timeline of the Stratasys + Nano Dimension + Desktop Metal + 3D Systems story (so far)
Stratasys terminates talks with 3D Systems after revised proposal worth $27 per share
Stratasys to enter discussions with 3D Systems despite Desktop Metal merger agreement
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
Desktop Metal response
Shortly after Stratasys announced the termination of the merger, Desktop Metal announced that its stockholders had voted for the agreement. Desktop Metal is now set to be compensated agreed-upon fees.
Ric Fulop, CEO of Desktop Metal said: “We’re grateful for our shareholders’ support. While the team at Desktop Metal believed in the merits of our combination, and is disappointed in the outcome of the merger agreement, we are completely confident in the trajectory of our business, which continues to lower operating costs while growing revenue. Our plan to reduce costs and generate revenue remains on track as customers continue transitioning to our AM 2.0 technologies for mass production of metal, polymer, ceramic and health products.”
Desktop Metal says it entered the second half of 2023 with cash of 127.6 million USD, and has demonstrated improvements to operating cash management over multiple quarters according to the company. Desktop Metal says it remains focused on continued improvements in non-GAAP gross margins, operating expenses, adjusted EBITDA, and operating cash flow, en route to the company’s stated goal of adjusted Q4 EBITDA profitability.
Analysis by TCT Group Content Manager Sam Davies
Since day one, this always appeared a likely outcome.
When the deal was announced on May 25th, there were already dissenting voices across social media, particularly from shareholders of the two companies.
At the time, Stratasys CEO Yoav Zeif confidently batted away suggestions that this might be a problem, telling TCT that ‘if everybody’s happy with the deal, you didn’t do a good deal.’
That’s true, but with this deal, the happiness of two sets of shareholders was needed. In other words, you needed to make everybody happy, or at least a majority.
Stratasys never quite managed to do that - for a host of reasons. First, Desktop Metal’s market cap has dropped by around 80%, and much of its technology portfolio isn’t (yet) mature enough to bring in the revenues expected of it up to now. Second, two of its largest shareholders – Nano Dimension and Donerail – never approved of the deal, campaigned against it, and in the end announced they would be actvely voting against the prospect of a Desktop Metal merger. And finally, Nano Dimension and 3D Systems independently, and aggressively, pursued their own mergers with Stratasys. There was too much choice, and not enough shareholders were on the same page as the Stratasys Board.
Now, the futures of several of the biggest additive manufacturing companies are up in the air. Stratasys has already announced it will explore strategic alternatives, but whether Desktop Metal will is yet to be seen.
3D Systems is the obvious alternative for Stratasys, given the company has made its intentions clear and the two have plenty of overlap in their portfolios. But they’ve been in discussions for months and haven’t ever reached an agreement – where control lies, TCT understands, is a major sticking point. 3D Systems, of course, has a deal on the table - albeit one the Stratasys Board has rejected - until October 5th, and this week reiterated its desire for Stratasys to countersign it, even offering to include a 60-day go-shop condition that would allow Stratasys to seek out better deals.
Whoever it is that Stratasys looks to merge with – should that still be the path it wants to go down – will have to have metal 3D printing technology in its portfolio, and if we consider Zeif’s June 2023 interview with TCT still to be relevant, specifically metal binder jet: “We got to manufacturing [with polymer],” he told TCT, “now we need to look at metal. The only real mass production technology in metal is binder jet.”
For Desktop Metal, the future is even more precarious. Many considered the Stratasys merger to be a great deal for Desktop Metal, given how significantly its market cap has reduced and that the adoption of its flagship metal binder jet platforms hasn't been as significant as the company hoped. It does have product offerings that will be of interest to others in the manufacturing hardware business – primarily its ExOne portfolio – but whether it would be able to strike a deal with another firm as good as the one it had with Stratasys remains to be seen. That’s if it would even want to.
Though it feels like a conclusion to the saga, there is undoubtedly more plays to be made by the companies involved. Expect 3D Systems to make another move now its hand has been strengthened, and don’t rule out Nano Dimension either; still the largest Stratasys shareholder and still the company to offer the most money per share for the takeover of Stratasys.
