In a move that was both a surprise and widely anticipated Desktop Metal and Stratasys are said to merge. Yoav Zeif is to be the new CEO, the deal is slated to close in Q4 of 2023. The duo will keep their brands aloft and hope to generate $1.1 Billion in Revenue with margins of between 10%-12% in 2025. They hope to save $50 million by 2025. The transaction is all stock and estimated to be worth 1.8 billion with DM shareholders getting 0.123 Stratasys share for each DM share. This values DM at 1.88 a share. 59% of the combined entity with be ex Stratasys shareholders while 41% will be DM. The duo hope to cross sell to the installed base and existing channel and reap the benefits of being the biggest player in additive.
I think that long term the slimmed down combination will have a lot of potential. But, I expect that it will be difficult for them to extract enough revenue from binder jet in the near term to justify the purchase. It would also spread the R&D budget of the firm rather thin. The Envisiontec unit would be a profit engine for the firm and some growth may come of that. On the whole however I do see risks as well as opportunities here. Below my analysis.
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