Nano Dimension offers to acquire Stratasys for $18.00 per share

Another chapter in the Stratasys-Nano Dimension saga is unfolding as the electronics 3D printing company presented a formal offer to acquire Stratasys for $18 per share. Today Stratasys is trading at about $14 per share so this would represent about a 22% margin. And a 36% premium compared to the March 1st closing stock price.

All this is happening as Nano Dimension CEO is fighting an internal hostile takeover attempt from Canadian firm Murchinson (you can learn more about that in the video that was released yesterday) and while the company sits on about $1.5 billion in cash that was accumulated as its stock rose to over $10 per share (it is now down to about $3 per share, after going as low as $2 per share). Stratasys stock, on the other hand, is trading at a 15-year low, after hitting as high as $140 in its 2013 peak, even as the company now records growing revenues.

Deciding How to spend that cash has been a challenge for Nano Dimension’s senior management, led by CEO Yoav Stern. The company made relatively minor acquisitions both in the 3D printing and electronics sectors but has so far been unable to make strategic investments with the bulk of the cash. As Mr. Stern say in yesterday’s video, he has not spent the company’s cash resources while looking for strategic investments. However, while the company is growing significantly in terms of revenues, it is also registering heavy losses as it builds its international structure. This puts pressure on Mr. Stern to make more acquisitions and Stratasys could present an ideal solution. In fact, Nano Dimension already acquired a 12.2% stake in Stratasys last year.

Stratasys senior management may or may not agree. When Nano Dimension acquired the 12.2% stake and hinted that it may increase its investment, the Stratasys board voted to implement a Rights Plan to protect its shareholders. This was designed to reduce the likelihood that any entity, person or group would gain control of, or significant influence over, Stratasys through the open-market accumulation of the Company’s shares without appropriately compensating all Stratasys shareholders for control.

The formal offer from Nano Dimension could bypass the Rights Plan by avoiding the open market and by providing adequate compensation. Nano Dimension reported that it has had communications with Stratasys and will continue to work toward a mutually acceptable definitive agreement. Stratasys generated about $650 million in revenue in the full fiscal year that just ended. The question is: will nearly $1.5 billion be considered an adequate price?

Yoav Stern, Chairman and Chief Executive Officer of Nano Dimension, shared, “We have great respect for Stratasys’ business, including Chief Executive Officer, Dr. Yoav Zeif, who we believe is the architect of Stratasys’ recent positive momentum. Together, Nano Dimension and Stratasys can offer an increasingly exciting set of solutions for customers while becoming better positioned to compete in the AME and AM industries. We believe this is an exceptional opportunity for all stakeholders – shareholders, customers, management, employees, and business partners – of both companies. In recent years the AM market has grown in size and accelerated remarkable technological advancement, and it is on the cusp of its next phase of development and growth. Bringing Stratasys and Nano Dimension together is about positioning both companies to succeed as a combined company and lead the industry into that next phase. With Nano Dimension’s strong culture of innovation and track record of successful merger integration, we expect to unlock significant value for all stakeholders. We look forward to continuing our discussions with Stratasys to reach a mutually acceptable transaction.”

Under the terms of the proposal, Nano Dimension, which has been the largest shareholder of Stratasys since July 2022 and currently owns approximately 14.5% of Stratasys’ outstanding shares (13.7% on a fully diluted basis), would acquire the remaining shares of Stratasys for total consideration of approximately $1.1 billion in cash. The offer price reflects a premium of 36% to the unaffected closing trading price as of March 1, 2023, and a 31% premium to the 60-day VWAP through March 1, 2023. The proposal delivers immediate and certain value to Stratasys’ shareholders and vastly strengthens the company’s ability to capitalize on opportunities and navigate the challenges of the current environment.

According to Nano Dimension, this deal will enable the two companies to unlock superior near-, medium- and long-term growth and value creation opportunities. Stratasys is positioned as a leader in the developed market for premium polymer-based 3D printing systems, material and consumables, with fused deposition modeling (FDM) and PolyJet AM machines for prototyping, while Nano Dimension is a pioneer in the high growth segments of 3D printing for some of the most challenging applications, including electronics, microfabrication, and high-performance components. The combination will effectively create a powerful platform and portfolio of AM for manufacturing capabilities, complemented by a new suite of high-growth products which, in order to best position the Company for continued success.

The combined company’s R&D capabilities could accelerate innovation to meet customer needs in the area of 3D printing, including the accelerated deployment of Nano Dimension’s deep learning-based AI group, DeepCube, which is the foundation of its cloud manufacturing platform.

Combining the two companies’ capabilities will increase the opportunity to deepen existing relationships across shared customers and industries by providing more value-added services and solutions, while also presenting new customer acquisition opportunities with an expanded and diversified platform that is unmatched in the industry. The combination of Nano Dimension and Stratasys will also create significant synergies by streamlining the organization of the two companies, including improving cost structure, aligning overhead and go-to-market efforts and yielding efficiencies by combining R&D resources.

The Proposed Transaction represents a unique opportunity to create significant value for Stratasys management and employees within an enlarged, globally-leading specialty additive manufacturing company, among other career benefits. A key success factor for Nano Dimension to date has been its ability to retain leaders that join the Company through its M&A strategy in the pursuit of shareholder value, and a key aspect of Nano Dimension’s interest in Stratasys is its strong management team, which it intends to retain as part of the combined business.

Most importantly, Nano Dimension believes that the companies together will create a business model with an envelope that encompasses the growth of both the top-line and bottom-line profitability.

The execution of a definitive merger agreement between Nano Dimension and Stratasys would be subject to due diligence and approval by each company’s Board of Directors and completion of the transaction would be subject to customary closing conditions, including receipt of required regulatory approvals and approval of Stratasys’ shareholders.

The full text of the letter delivered to Stratasys by Nano Dimension on March 6, 2023 is included below.

March 6th, 2023
To: The Board of Directors of Stratasys Ltd.
Attn: Dov Ofer, Chairman, and Yoav Zeif, Chief Executive Officer

Dear Mr. Ofer and Mr. Zeif,

As you are aware, for nearly a year now, Nano Dimension Ltd. (collectively with its affiliates, “NANO”) has been a significant shareholder of Stratasys Ltd. (“Stratasys” or the “Company”) and is currently your largest shareholder with approximately 14.5% of the Company’s common stock outstanding (13.7% on a fully diluted basis2).  We made our investment because we have high regard and appreciation for the Company’s achievements. We have been particularly impressed by the Company’s trajectory as a polymers’ Additive Manufacturing (“AM”) pioneer creating the preeminent platform for premium polymers’ 3D printing systems, material and consumables as well as design and other supporting software.  The combination of these capabilities together with strategic acquisitions has positioned the Company as a leading manufacturer of fused deposition modeling (FDM) & PolyJet AM machines for prototyping.

We believe now is the time to combine our two companies and are pleased to present to you this non-binding indicative offer (the “Indicative Offer”), which outlines the principal terms and conditions under which NANO would propose to enter into a business combination with Stratasys (the “Proposed Transaction”). We are highly confident in the merits of the Proposed Transaction and we strongly believe the offer represents an attractive proposal for all stakeholders of the Company.