Stratasys has ended its merger talks with 3D Systems.

Are 3D Systems and Stratasys Ending Discussions Over a Merger?

In recent news, it appears that 3D Systems and Stratasys, two major players in the additive manufacturing (AM) industry, have ended discussions regarding a potential merger. While 3D Systems has put forth a revised proposal to merge with Stratasys, the latter remains committed to a previously-announced merger with Desktop Metal.

In the revised offer, each share of Stratasys would be converted into $7 in cash and 46% ownership in the combined entity. The directors of both companies met on August 22, 2023, where Stratasys acknowledged the potential material cost synergies but deemed the current valuation of 3D Systems shares insufficient for the deal. Moreover, Stratasys expressed its unwavering commitment to the Desktop Metal merger, refusing further discussions with 3D Systems.

Dr. Jeffrey Graves, President and CEO of 3D Systems, voiced disappointment, accusing Stratasys of “running out the clock” and proceeding with a “massively value-destructive” merger with Desktop Metal. In response to Stratasys’ preference for less cash and higher upside participation, 3D Systems has proposed a higher stock ownership for Stratasys shareholders. Additionally, the offer includes a $50 million reverse termination fee payable to Stratasys if antitrust clearances are not obtained, as well as a $10 million retention program for key talent.

However, the Stratasys Board argued that the revised proposal only represented a value of $15.26 per share for Stratasys, with a premium of just 3% compared to the unaffected closing stock price. Therefore, the Board concluded that the proposal did not constitute a “Superior Proposal” as defined in its merger agreement with Desktop Metal, leading to the termination of discussions with 3D Systems.

The Board cited several reasons for its dissatisfaction with the deal, including concerns about 3D Systems’ growth rate and recent news surrounding Align Technologies, one of its largest customers. The Board raised concerns that if Align shifts its sourcing, it may negatively impact 3D Systems’ dental business and ultimately hinder the profitability and margins of a combined company.

Furthermore, the Stratasys Board expressed uncertainty about the future market share and margins of 3D Systems’ business, especially considering the potential growth of alternative printing technologies. Align’s recent acquisition of Cubicure GmbH, a direct 3D printing firm, has further exacerbated these concerns.

In addition to these internal considerations, the U.S. Department of Justice is currently investigating whether such a merger would violate antitrust laws, suggesting that a larger combination between Stratasys and 3D Systems would face substantial obstacles.

In conclusion, while 3D Systems has made efforts to combine with Stratasys through a revised proposal, Stratasys remains committed to its merger with Desktop Metal. The Stratasys Board believes that the revised proposal does not meet their criteria for a “Superior Proposal,” citing concerns about 3D Systems’ growth, Align Technologies’ impact on profitability, and potential regulatory challenges. As of now, discussions between the companies have been terminated.

Integrating successfully is crucial for any business merger, but it seems that 3D Systems may have fallen short in this aspect with Stratasys. Despite waiting for critical due diligence from 3D Systems, Stratasys seems unwavering in its decision to merge with Desktop Metal. The company has made it clear that the Desktop Metal merger is its preferred choice. The shareholders of both Desktop and Stratasys are scheduled to vote on the merger on September 28, 2023.

The ongoing merger saga has demonstrated that there are no predictable outcomes, and even analysts, like myself, can be proven wrong. Dr. Graves, during his comments, acknowledged this uncertainty and stated that they will continue to evaluate their options to ensure the successful completion of this transformative transaction for the additive manufacturing industry.

To keep everyone informed about the progress of the negotiations, our “Printing Money” podcast will provide updates and insights. We have already discussed the state of the negotiations in our latest episode, and as the Additive Manufacturing Strategies event approaches on February 6-8, 2024, we can expect a more definitive conclusion to the saga. Show attendees will have the opportunity to hear from various CEOs involved in the negotiations, including Yoav Zeif from Stratasys and Ric Fulop from Desktop Metal, who will be presenting at the event.

It is important to stay up-to-date with the latest news from the 3D printing industry, and we strive to provide that information to our readers. Additionally, we also share valuable information and offers from third-party vendors.

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