Stratasys, the popular 3D printer maker, said on Thursday, it will be merging with Desktop Metal for $1.8 billion. The merger will be done entirely with stocks.
Stratasys, based in Israel, has rejected several offers for takeover by Nano Dimension Ltd, its largest shareholder. Nano currently has a 14.2% stake in Stratasys but tried to boost it to 53% to 55% by a hostile takeover. While Desktop Metals went on an acquisition spree of other companies in 2021.
The merger will combine the polymer advantages of Stratasys with the mass production capacities of Desktop Metal. This will put them in a unique position to better serve the changing needs of the customers in the market.
The agreement will be closed in the latter half of 2023. Together both companies are expected to generate revenues of around $1.1 billion in 2025 taking up a significant portion of a $100 billion market by 2032.
The terms of the agreement
The board of directors of both companies collectively agreed for Desktop Metal shareholders to receive 0.123 ordinary shares of Stratasys in exchange for every share of Desktop Metal Class A common stock.
Stratasys’ shareholders, on the other hand, will own 59% of the entire company while Desktop Metals will hold the other 49%.
As the announcement was made, Stratasys shares rose to 2.7% before the opening bell while Desktop Metal’s share rose to 9.7%.
Desktop Metal, based out of the United States, primarily operates in the aerospace, consumer products and automotive industries. This merger will help them expand their offerings by having designing, prototyping and tooling capabilities into their mass production processes. Stratasys’ aim is to become a leader in 3D printers in an already divided market.
The announcement on Thursday came as a surprise to many as Stratasys was an early investor in Desktop Metals. The selling point in this merger is, undoubtedly, Desktop’s ownership of ExOne, another 3D printing company.
Strategic and Financial Advantages of the Merger
Both Stratasys and Desktop Metal have unique selling points of their own. Desktop owned EvisionTEC can help Stratasys’s work in dental. As Dr Yoav Zeif, CEO of Stratasys pointed out, Desktop has one of the most advanced R&D teams in the industry with top of the market infrastructure which will allow them to provide outstanding service to the customers. Both companies stand to gain an extensive portfolio of products made with several manufacturing technologies.
The IP portfolios of both companies are highly complementary. Together they have invested around $500 million in R&D alone in the last four years. This merger will create one of the largest R&D teams in the industry with around 800 experts. Another benefit of this merger would be in terms of the customer base. Both companies would be bringing around 27,000 unique customers in the industry and would be the largest in the industry as well.
The combined company will be led by Dr Zeif as the CEO and Mr Fulop as Chairman of the board. The total board of directors would be 11 members, five of each will be selected by both companies.