AM Investment Strategies
AMS Spring 2023

Covestro Sells 3D Printing Unit to Stratasys

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Covestro (FWB: 1COV) has sold its 3D printing business to Stratasys (NASDAQ: SSYS) for €43 million. Additionally, there is a possible earn out of €37 million. This is rather unexpected.

Covestro’s 3D Printing Business

We did notice that Covestro was not moving as fast as it could have to grow the business, but an outright sale to an incumbent did not seem to be in the cards. Also, Covestro´s business includes the resin business of DSM’s Somos and that would seem to have been a better fit for 3D Systems, especially since 3D Systems is undergoing a pivot to medical at the moment. All of the current Covestro 3D printing staff and facilities will be transferred to Stratasys.

Geoff Gardner, Innovation Director Additive Manufacturing at Covestro (left) and James Reeves, Global Director for Polymer Printing at voxeljet (right) in front of the VX1000 HSS with parts printed with TPU from Covestro

Geoff Gardner, Innovation Director Additive Manufacturing at Covestro (left) and James Reeves, Global Director for Polymer Printing at voxeljet (right) in front of the VX1000 HSS with parts printed with TPU from Covestro. Image courtesy of voxeljet.

“Additive manufacturing is a growing, but also highly competitive market. We are convinced that Stratasys offers the optimal conditions to support the further growth of our former Additive Manufacturing Business in this field,” said Dr. Thomas Toepfer, CFO of Covestro.

“Innovative materials are the fuel of additive manufacturing and translate directly into the ability to create new use cases for 3D printing, particularly in the production of end-use parts like dental aligners and automotive components. The acquisition of Covestro’s highly regarded Additive Manufacturing business positions us to further grow adoption of our newest technologies. We will now have the ability to accelerate cutting-edge developments in 3D printing materials, and advance our strategy of providing the best and most complete polymer 3D printing portfolio in the industry,” said Stratasys CEO Dr. Yoav Zeif.

Covestro seemed to buy the DSM unit in a move to appear to be innovative, taking leadership in a exciting new market. This was amid considerable headwinds for the company whose stock has been reduced by two-thirds over the past few years. Revenues also declined precipitously from 2018 to 2020 before jumping again this year. Covestro´s core TPU business is under sustained assault still. Perhaps it was just never big enough, with sufficient focus from the board, to be really meaningful.

Fuse box made of polybutylene terephthalate from Covestro, produced by laser sintering on a Farsoon machine.

Fuse box made of polybutylene terephthalate from Covestro, produced by laser sintering on a Farsoon machine. Image courtesy of Covestro.

What this Means for Stratasys

For Stratasys, on the other hand, this is a very meaningful move. It will help it increase margin on its service business and help it sell to people operating machines from 3D Systems and others. Its unclear how this move will affect the 3D printing materials alliance approach, with which Stratasys has opened up to others materials on its 3D printers.

At the same time, this move could be complex, since some vendors perhaps would not like to work with Stratasys directly or let key knowledge leak to them. It cements Stratasys in certain areas and could see it come up with integrated materials and printer offerings that could be very valuable. The company could also learn very quickly by combining polymer, application and 3D printer knowledge in precise offerings for certain markets. It seems like an opportunistic move by Stratasys that may benefit the firm, but 3D Systems would have benefited more if it would have taken the deal. Also, if the unit would have gone to BASF, the German chemical giant would be the materials leader with a near-monopoly on 3D printing materials. It is unclear why BASF team didn’t go for this deal. But, this could really benefit Stratasys and add to their growth.

In light of Nano Dimension buying a 12% stake in Stratasys, it positions the 3D printer manufacturer as the hunter and not the prey, providing it with a narrative of upward trajectory. It will be some time before Stratasys manages to calm the nerves of its materials partners and some other clients of the Covestro Additive business. There will have to be a lot of hand holding to smooth things over.

Whereas the polymer companies were in the driving seat for the last few years, it seems like their excessive flirtation with 3D printing has not led to the volumes they need to remain interested. BASF is the behemoth in polymer 3D printing materials now, with a few other large firms operating specialized units in the space. Now, it will be up to the OEMs to take back the wheel and drive the market forward.

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