Acquisitions, Mergers & PartnershipsAM Industry

Stratasys Board categorically rejects Nano’s offer but opens to 3D Systems

The company is now taking into consideration that the merger may represent a higher value than the Desktop Metal deal

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In what could be the final chapter of the ongoing merger saga (but that remains to be seen) the Stratasys board has agreed to engage in discussions with 3D Systems while it has, also unanimously, rejected the Nano Dimension proposal, going as far as saying that Nano Dimension’s CEO Yaov Stern “cannot be trusted” and “is not qualified to manage Stratasys”.

The Board has unanimously determined that the July 13, 2023 revised unsolicited proposal by 3D Systems Corporation to acquire Stratasys for $7.50 in cash and 1.5444 newly issued shares of 3D Systems common stock per ordinary shares of Stratasys would reasonably be expected to result in a “Superior Proposal” as defined in Stratasys’ merger agreement with Desktop Metal, Inc..

On May 25, 2023, Stratasys entered into a merger agreement with Desktop Metal, pursuant to which Desktop Metal agreed to combine with Stratasys in an all-stock transaction. Stratasys remains bound by the terms of the Desktop Metal merger agreement and the Board has not determined that 3D Systems’ July 13, 2023 revised proposal in fact constitutes a Superior Proposal as defined in the merger agreement with Desktop Metal, and the Stratasys Board has not changed its unanimous approval, recommendation and declaration of advisability of the transaction with Desktop Metal. Stratasys notes that there can be no assurance that the discussions with 3D Systems will result in a Superior Proposal, an agreement, or a transaction.

Desktop Metal's second quarter 2022 financial results. A record revenue of $57.7 million and expansion of non-GAAP gross margins to 26.7%

While it opened up to 3D Systems, the Stratasys Board of Directors unanimously and categorically rejected Nano Dimension’s revised partial tender offer, urging shareholders “not to tender into Nano’s coercive partial tender offer, to withdraw any shares previously tendered and to contact their broker and instruct them to file a notice of objection.”

According to a Stratasys press release on the matter, “Nano’s partial tender means Stratasys shareholders who tender their shares may have as few as approximately 40% of their shares purchased. In addition, Stratasys denounced that “the partial tender offer implies a blended value of approximately $15 to $19 per share or less, assuming full participation in the offer, given that Stratasys being controlled by Nano is likely to lead to Stratasys shareholders’ remaining shares trading at a heavily discounted level, which could be approximately $9 to $15 per share or less.”

The press release goes on to point out that “Nano has destroyed significant value and trades at negative firm value” and that “Yoav Stern, Nano’s CEO, cannot be trusted, has made misrepresentations about Stratasys and is not qualified to manage Stratasys. Since Yoav Stern’s appointment – the statement continues – Nano has spent more than $500 million in cash and increased its revenue by only $44 million.” In addition, the acceptance of Nano Dimension’s offer may block any possibility of a deal with 3D Systems. The Stratasys statement concludes that “voting for Nano’s slate will enable Nano to take control of Stratasys without paying shareholders, irrespective of the partial tender offer and that Nano’s slate of director candidates is unqualified and has far less relevant experience and expertise than Stratasys’ slate of directors.”

In what is becoming an increasingly verbally violent feud, Nano Dimension replied by encouraging Stratasys shareholders to “replace entrenched Board and by highlighting “problematic track records of Stratasys directors”, including very grave accusations such as “a blatant disregard for shareholders’ interests”, “resistance to change” and having “lined their own pockets while overseeing poor performance, indulging themselves with exorbitant salaries and annual equity grants, cumulatively equaling approximately $1,820,0001 in FY 2022 for 8 directors, not including meeting fees, (for approximately 10-20 meetings per annum), and travel & entertainment expense.”

Nano Dimension also said in its own statement that the Board’s decision-making “has been marred by destructive acquisitions,” that “they have made poor, value-destructive and money-wasting acquisitions and/or failed to integrate the acquisitions of Origin, Ultimaker, SolidConcepts, and MakerBot, followed by the questionable divestment and reinvestment in MakerBot.” Nano Dimension argues that “these actions demonstrate a lack of strategic foresight and a failure to prioritize long-term value creation for the company and its shareholders.”

The company goes on to describe past unethical behavior by Stratasys Board members including Yair Seroussi, Dov Ofer and in particular former CEO David Reis, and the $490 MakerBot acquisition that resulted in a lawsuit against Reis as the consumer brand laid off almost 40% of its workforce and shut down its retail shops. Meanwhile, the value of Stratasys shares collapsed over the course of the two years post-acquisition, from record highs of almost $137 per share in 2013 to around $23 per share by the end of 2015.

Nano also says that Yoav Zeif, the current Stratasys CEO, is “an unproven CEO having served before only as a consultant and in business development roles” and that Stratasys is being accused by the former founders and shareholders of Origin, a company Stratasys purchased under Zeif’s leadership for $97M, for not fulfilling its obligations and personal commitments to pay them their promised earnout as per agreement. As can be imagined, Nano argues that its own candidates to replace the Stratasys board are highly qualified with extensive experience overseeing value creation (and provides details).

Stratasys Board categorically rejects Nano's offer but opens to 3D Systems merger and that it may be superior to Desktop Metal deal

In the evening, 3D Systems released an official statement saying it “welcomes ‘superior proposal’ determination by the Stratasys Board and strong support from shareholders of both companies,” adding that  “3D Systems’ signed merger agreement awaits countersignature by Stratasys.” The company now expects a swift termination of the Desktop Metal merger agreement, via the payment of a termination fee to Desktop Metal by 3D Systems, and subsequent entrance into the 3D Systems-Stratasys merger agreement

“We are pleased with the Stratasys Board’s determination. We anticipate prompt termination of the Desktop Metal merger agreement and countersignature of the agreement to combine 3D Systems and Stratasys so that we can deliver our collective stakeholders the unparalleled benefits of the envisioned combined company,” said President and CEO, Dr. Jeffrey Graves. “Together, 3D Systems and Stratasys are well-positioned to capture the benefits of scale needed to lead in the additive manufacturing industry and deliver long-term profitable growth. We reiterate our confidence in the strength of the combined financial profile of 3D Systems and Stratasys, including our ability to realize $100 million of synergies jointly identified by our two management teams during due diligence exercises in September 2022.”

Concluded Dr. Graves, “Shareholders have spoken that a combination between 3D Systems and Stratasys presents the most compelling opportunity for the additive manufacturing industry, and it is now time for the Board of Stratasys to move quickly to make this transaction a reality. If the Stratasys Board engages promptly, we believe that Stratasys should be able to sign the merger agreement this week.”

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