Acquisitions, Mergers & PartnershipsAM Industry

3D Systems delivers enhanced binding offer to Stratasys

With implied value of approximately $28 per share and approximately $2 billion in total value

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After Nano Dimension made its new offer, 3D Systems (NYSE:DDD) also made a new binding offer to combine with Stratasys Ltd. (NASDAQ: SSYS). According to the terms, each Stratasys share will convert into $7.50 in cash and 1.5444 shares of the combined company, representing ownership by the Stratasys shareholders, in the aggregate, of approximately 44% of the shares of the combined company, in addition to the approximately $540 million of aggregate cash consideration being offered.

According to 3D Systems, this new binding offer represents compelling value for Stratasys shareholders by any measure. The implied value per Stratasys share of $24.07, based on 3D Systems July 12, 2023 closing share price, represents a 62% premium to the closing price per Stratasys share on May 24, 2023, the last trading day prior to the announcement of the proposed transaction by Stratasys with Desktop Metal.

The implied value of approximately $28 per Stratasys share, or an approximately 80% premium, inclusive of $100 million of mutually identified and agreed-upon cost synergies, represents a ~15% improvement to 3D Systems’ proposal submitted to the Stratasys Board on May 30, 2023. So far the merger attempts have had a positive effect on the stock value of most of the companies involved, with the exception of Desktop Metal. Interestingly, the value of 3D Systems and Stratasys stocks are almost perfectly aligned.

President and CEO Dr. Jeffrey Graves stated, “We have continued to pursue a friendly combination with Stratasys with the objective of maximizing value for the shareholders of both companies. Multiple large Stratasys shareholders have reached out to inform us that they believe a combination of 3D Systems and Stratasys is the right path forward. This feedback affirms our conviction that we are doing right by shareholders today by offering exceptional value, certainty and transparency, and agreeing to pick up the termination fee that will be payable to Desktop Metal.”

Dr. Graves continued, “We have taken every step to improve the value, certainty and transparency of our proposal and look forward to constructively engaging with the Stratasys Board so that we can mutually pursue a transaction that will change the landscape of the additive manufacturing industry for the benefit of not only investors but also employees and customers. We are taking this decisive action now to remove any reasonable doubt about whether 3D Systems’ offer is likely to result in a superior proposal. While we believe our previous offers should have constituted a superior proposal, we are confident that this enhanced offer and signed merger agreement unequivocally constitutes a superior proposal to any other before Stratasys.”

3D Systems delivers enhanced binding offer to Stratasys
3D Systems’ DMP Factory 500 system

Concurrently with the announcement of this binding offer, 3D Systems has delivered to Stratasys a signed merger agreement in escrow. This merger agreement, which lays out the details of the merger and, as required, will be filed on Form 8-K with the SEC by 3D Systems, now awaits countersignature by Stratasys.

The terms outlined in 3D Systems’ merger agreement, including the representations, warranties, covenants, closing conditions and termination rights, were designed to track those in the Desktop Metal merger agreement in order to offer Stratasys and its shareholders at least as much certainty as the Desktop Metal transaction. These terms include 3D Systems picking up the Desktop Metal termination fees that result from the failure to obtain Stratasys’ shareholder approval of such agreement and as a result of the entrance by Stratasys into the merger agreement with 3D Systems.

3D Systems will fund the cash consideration from the pro forma balance sheet of the combined company and, as such, the proposed merger is not subject to any debt or equity financing condition. Each Stratasys shareholder will have the right to elect to receive its preferred mix of cash and stock consideration, subject to the shareholder-friendly election, cap and proration mechanisms.

3D Systems delivers enhanced binding offer to Stratasys
Stratasys’ newest Polyjet range

Stratasys shareholders will receive shares of a Delaware-incorporated, domestic SEC registrant. This transition away from holding shares of a foreign private issuer will result in their holding shares in an issuer with access to a significantly broader capital markets base. Moreover, while Stratasys shareholders will need to consult with their own tax advisors, this structure will generally enable Stratasys shareholders to receive the share consideration on a tax-free basis.

3D Systems is confident that all applicable regulatory clearances will be obtained and therefore makes a strong commitment to obtaining requisite regulatory clearances. In addition, in contrast to the proposed Desktop Metal merger, no CFIUS approval is required for the proposed combination of Stratasys and 3D Systems.

The Desktop Metal merger agreement contains unusual terms, including a requirement for a number of existing contracts of Desktop Metal to be modified or terminated in advance of closing, a provision for the payment of a termination fee of $19 million by Stratasys to Desktop Metal if these contracts are not modified or terminated, and a provision that the Desktop Metal merger agreement may be terminated if a shareholder were to hold more than 50% of either company. The merger agreement with 3D Systems has no such contingencies hanging over the pathway of the shareholders of both companies to realize superior value upon consummation.

Finally, in contrast to the Desktop Metal merger agreement, Stratasys will have the right to terminate this merger agreement to enter into a superior proposal, ensuring that the shareholders of Stratasys are able to receive, at the end of the day, the best value attainable for their shares.

 

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Davide Sher

Since 2002, Davide has built up extensive experience as a technology journalist, market analyst and consultant for the additive manufacturing industry. Born in Milan, Italy, he spent 12 years in the United States, where he completed his studies at SUNY USB. As a journalist covering the tech and videogame industry for over 10 years, he began covering the AM industry in 2013, first as an international journalist and subsequently as a market analyst, focusing on the additive manufacturing industry and relative vertical markets. In 2016 he co-founded London-based VoxelMatters. Today the company publishes the leading news and insights websites VoxelMatters.com and Replicatore.it, as well as VoxelMatters Directory, the largest global directory of companies in the additive manufacturing industry.

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