3D Systems has announced an increased, binding offer to combine with Stratasys, the third takeover offer submitted by the company. Each Stratasys share would convert into 7.50 USD in cash and 1.5444 shares of the combined company, which would give Stratasys shareholders approximately 44% of the shares of the combined company in addition to the approximately 540 million USD of aggregate cash being offered. 3D Systems says the deal implies approximately 2 billion USD in total value for the proposed combined company, inclusive of 100 million USD in cost synergies.
The cash on offer is the same as the previous two offers from the company, whereas the amount of shares being offered has increased. The initial bid from May 30 offered approximately 40% of the combined company, and the increased bid in June offered 41%. 3D Systems says the latest offer represents a 15% improvement to the initial proposal.
3D Systems included these details of the offer:
- Implied value per Stratasys share of $24.07, based on 3D Systems July 12, 2023 closing share price, representing a 62% premium to the closing price per Stratasys share on May 24, 2023, the last trading day prior to the announcement of the proposed transaction by Stratasys with Desktop Metal.
- Implied value of approximately $28 per Stratasys share, or an approximately 80% premium, inclusive of $100 million of mutually identified and agreed upon cost synergies.1
Dr. Jeffrey Graves, President and CEO of 3D Systems said: “We have continued to pursue a friendly combination with Stratasys with the objective of maximising value for the shareholders of both companies. Multiple large Stratasys shareholders have reached out to inform us that they believe a combination of 3D Systems and Stratasys is the right path forward. This feedback affirms our conviction that we are doing right by shareholders today by offering exceptional value, certainty and transparency, and agreeing to pick up the termination fee that will be payable to Desktop Metal.
“We have taken every step to improve the value, certainty and transparency of our proposal and look forward to constructively engaging with the Stratasys Board so that we can mutually pursue a transaction that will change the landscape of the additive manufacturing industry for the benefit of not only investors, but also employees and customers. We are taking this decisive action now to remove any reasonable doubt whether 3D Systems’ offer is likely to result in a superior proposal. While we believe our previous offers should have constituted a superior proposal, we are confident that this enhanced offer and signed merger agreement unequivocally constitutes a superior proposal to any other before Stratasys.”
3D Systems has also delivered to Stratasys a signed merger agreement in escrow. The agreement lays out the details of the merger, and as required, will be filed on Form 8-K with the SEC by 3D Systems.
The terms outlined in the proposed merger agreement from 3D Systems, including the representations, warranties, covenants, closing conditions and termination rights, were designed to track those in the Desktop Metal merger agreement in order to offer Stratasys and its shareholders “at least as much certainty as the Desktop Metal transaction” according to 3D Systems.
These terms were highlighted in the press release from 3D Systems:
- 3D Systems Picks Up the Desktop Metal Termination Fees: 3D Systems will pay, on behalf of Stratasys, the full amount of any termination fees owing to Desktop Metal, as a result of the failure to obtain Stratasys’ shareholder approval of such agreement and as a result of the entrance by Stratasys into the merger agreement with 3D Systems.
- No Financing Condition: 3D Systems will fund the cash consideration from the pro forma balance sheet of the combined company and, as such, the proposed merger is not subject to any debt or equity financing condition.
- Right to Elect Form of Consideration: Each Stratasys shareholder will have the right to elect to receive its preferred mix of cash and stock consideration, subject to the shareholder-friendly election, cap and proration mechanisms.
- Advantageous tax and capital markets structure: Stratasys shareholders will receive shares of a Delaware-incorporated, domestic SEC registrant. This transition away from holding shares of a foreign private issuer will result in their holding shares in an issuer with access to a significantly broader capital markets base. Moreover, while Stratasys shareholders will need to consult with their own tax advisors, this structure will generally enable Stratasys shareholders to receive the share consideration on a tax-free basis.
- Regulatory Clearance Certainty with No CFIUS Risks: 3D Systems is confident that all applicable regulatory clearances will be obtained and therefore makes a strong commitment to obtain requisite regulatory clearances. In addition, in contrast to the proposed Desktop Metal merger, no CFIUS approval is required for the proposed combination of Stratasys and 3D Systems.
- Removal of Unusual Desktop Metal Terms: The Desktop Metal merger agreement contains unusual terms, including a requirement for a number of existing contracts of Desktop Metal to be modified or terminated in advance of closing, a provision for the payment of a termination fee of $19 million by Stratasys to Desktop Metal if these contracts are not modified or terminated, and a provision that the Desktop Metal merger agreement may be terminated if a shareholder were to hold more than 50% of either company. The merger agreement with 3D Systems has no such contingencies hanging over the pathway of the shareholders of both companies to realize superior value upon consummation.
- Right of Stratasys to Terminate to Accept a Superior Proposal: In contrast to the Desktop Metal merger agreement, Stratasys will have the right to terminate this merger agreement to enter into a superior proposal, ensuring that the shareholders of Stratasys are able to receive, at the end of the day, the best value attainable for their shares.
Stratasys rejected the previous two offers from 3D Systems. In response to both offers, which were non-binding proposals, Stratasys said that they did not constitute a “Superior Proposal” and did not provide a basis upon which to enter discussions with the company.
In the press release detailing the increased offer, 3D Systems highlighted its view of the “key benefits” of its proposed transaction with Stratasys:
- Scale Drives Leadership: Delivers immediate scale for leadership in the rapidly growing and fragmented additive manufacturing industry.
- Complementary Technology Portfolio: Combination of proven technologies with limited overlap, creating a combined portfolio better positioned to service nearly every vertical in the 3D printing market today.
- Significant Cost Synergies: Highly certain value creation potential through realization of at least $100 million in cost synergies across SG&A savings, R&D integration and COGS optimization, jointly identified by members of both companies’ management teams during due diligence sessions in September 2022, in addition to significant revenue opportunities not currently included in 3D Systems’ pro forma valuation analysis.
- Industry Leading Financial Profile: Estimated LTM combined revenue of $1.2 billion and ~12% EBITDA margin2, and no debt or equity financing contemplated.
- Meaningful Growth Opportunities from Regenerative Medicine: Unmatched bioprinting leadership potential, with a clear road map for human applications, including human trials for 3D printed lungs anticipated by 2026.
Hours after the announcement of the new offer from 3D Systems, Stratasys released a statement acknowledging the receipt of a "revised unsolicited proposal" from the company. As the company said in its acknowledgement of the previous offers from 3D Systems, it will "carefully review the revised 3D Systems proposal in consultation with its independent financial and legal advisors and in accordance with its duties under applicable law, and its obligations under Stratasys’ merger agreement with Desktop Metal."
In the statement, Stratasys said that its board has not changed its "unanimous approval, recommendation and declaration of advisability"of the merger transaction with Desktop Metal.
Stratasys’ Board is currently reviewing an increased special tender offer from Nano Dimension, and intends to inform shareholders of its position within 10 working days from July 10, 2023. Stratasys shareholders will also vote on the board of directors proposed by Nano at the upcoming Stratasys AGM on August 8.
Read more:
Stratasys and Desktop Metal to merge in deal worth $1.8 billion
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3D Systems makes Stratasys takeover attempt
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3D Systems submits improved Stratasys takeover bid; Stratasys Board to review
