Breaking News: Stratasys and Desktop Metal Terminate Merger
In a surprising turn of events, Stratasys and Desktop Metal have announced the termination of their planned merger, despite obtaining shareholder approval from the latter. This unexpected development has left many in the additive manufacturing industry wondering about the reasons behind the fallout and the implications for both companies.
Stratasys wasted no time after terminating the merger. The company’s Board of Directors immediately initiated a comprehensive process to maximize shareholder value. This strategic review could potentially lead to a new merger, business combination, or even a sale of the company. Dov Ofer, Chairman of Stratasys’ Board of Directors, emphasized their commitment to delivering value to customers and shareholders. To support the board’s fiduciary duties and protect the company’s long-term value, an amendment to Stratasys’ shareholder rights plan was unanimously adopted.
The news of the merger’s termination follows unsuccessful discussions between Stratasys and 3D Systems over a potential merger. 3D Systems had proposed acquiring Stratasys, offering $7 in cash per share and a 46% ownership in the combined entity. However, Stratasys rejected the offer, citing inadequate valuation of 3D Systems shares and reaffirming its commitment to the merger with Desktop Metal.
Desktop Metal, despite being disappointed by the termination, remains optimistic about its future. CEO Ric Fulop expressed his expectation of this outcome, given the historical challenges faced by Stratasys among its shareholder base. He even called the termination a blessing in disguise, saying his company is excited and bullish about its trajectory.
As for the financial health of both companies, Desktop Metal seems to have a positive end cash position. With $127 million in cash last quarter and additional cash expected from termination fees, the company is aiming to achieve its first adjusted EBITDA profitable quarter in Q4. However, concerns arise due to consistent negative operating and free cash flows, as well as increasing net income losses. While the balance sheet appears strong, with $754.3 million in assets, there has been a year-on-year decrease. Total Debt has also seen an upward trend, signaling a shift towards more leverage.
On the other hand, Stratasys is also facing financial challenges. The company has been experiencing negative operating cash flows and is currently not profitable. Despite these issues, Stratasys has maintained a stable end cash position, possibly due to its financing activities. The company’s asset base stands at around $1.26 billion, and liabilities are relatively low, leaving it with a strong equity position. Nonetheless, negative trends in cash flows and profitability metrics raise concerns about the efficiency of its operations and the effectiveness of its current business model.
The termination of the merger marks a significant turning point for both Stratasys and Desktop Metal. With the planned merger no longer an option, Desktop Metal will receive pre-agreed compensation fees, although the specifics remain undisclosed. CEO Ric Fulop reassured stakeholders that his company is not for sale and provided insight into their ongoing innovations, such as their work with Toyota and Tesla in automotive giga casting.
Despite the uncertainty resulting from the termination, both companies are determined to move forward. Stratasys, as the leading player in the additive manufacturing space, aims to maximize shareholder value through its comprehensive strategic review. Desktop Metal remains focused on its trajectory and achieving profitability, even amidst the financial challenges it may face.
The additive manufacturing industry will undoubtedly be closely watching the next steps of both Stratasys and Desktop Metal as they navigate through this unexpected turn of events.
BMW has made a bold statement regarding its future in the consumer electronics industry, with CEO Ric Fulop expressing confidence in their ability to make a significant impact. Fulop’s optimism was further fueled by the news that Apple would be utilizing metal binder jetting to produce titanium watch cases for the highly anticipated Apple Watch Ultra. This announcement not only boosted Desktop Metal’s stock, but also shed light on the company’s role in the automotive industry, particularly in the production of sand casting cores and molds for major auto manufacturers.
In a powerful demonstration of binder jetting in an industrial environment, BMW showcased the use of Desktop Metal machines in their manufacturing processes. Fulop emphasized that Desktop Metal is a technology company at its core, focused on innovation and driving the advancement and adoption of additive manufacturing (AM). They take pride in designing their own furnaces and shop systems, highlighting their commitment to technological excellence.
In contrast, Stratasys, another major player in the 3D printing industry, appears to be exploring alternative strategies, potentially including a merger or sale. It is speculated that major investors opposing the merger had ties to Nano Dimension and 3D Systems, which may prompt shareholders to reconsider a combination with the latter. Alternatively, other business entities looking to enter the AM industry could pursue an acquisition or merger with Stratasys. Bosch, a firm that has dabbled in 3D printing internally for many years, or even HP, with its previous partnership with Stratasys, are potential contenders.
Fulop believes that the failed merger between Stratasys and Desktop Metal could have been a game-changer in the industry, posing a significant threat to competitors like 3D Systems. Despite this setback, he remains hopeful that people will look back on this moment in the future and question whether it was a missed opportunity.
As both Desktop Metal and Stratasys embark on separate paths, it is clear that the additive manufacturing industry is at a pivotal moment. The fallout from the failed merger not only highlights differing perspectives among shareholders but also sets the stage for two distinct trajectories within the industry. It is crucial for industry observers to keep a close eye on the future developments of both companies, as they will undoubtedly shape the landscape of 3D printing.
“Why did the 3D printer go to therapy? Because it had too many layers of unresolved issues!”
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