Mergeracolypse has taken another step toward completion, as multiple companies—Desktop Metal (NYSE: DM), 3D Systems (NYSE: DDD), and Nano Dimension (Nasdaq: NNDM)—seek to combine with industry stalwart Stratasys (Nasdaq: SSYS). The latest development sees Israeli electronics 3D printing company Nano Dimension Ltd. announce that it has withdrawn its special tender offer to Stratasys (Nasdaq: SSYS) shareholders, as well as its efforts to replace the company board. The news comes amid discussions between Stratasys and 3D Systems about a possible merger.
Nano Dimension “Stands Down”
After months of confrontational media and mud-slinging, Nano Dimension Chairman and CEO Yoav Stern has put a sudden halt to its hostile takeover of Stratasys, saying, “We believe that our efforts to convince a sufficient number of Stratasys’ shareholders that their entrenched board will continue its track record of leading the company toward new disasters has fallen short.”
In particular, Stern highlighted the shareholder rights plan (“poison pill”) that Stratasys adopted to prevent Nano from acquiring more than 15 percent of the company as being an impediment to the all-cash tender offer it has made to shareholders at large. One of the conditions for closing the tender offer was the termination of the poison pill, but the company has declined to do so. Stern continued:
“The Stratasys board’s stance makes it clear that the poison pill is there to stay and will continue to block shareholders from having an opportunity to tender their shares. Furthermore, a timely declaratory judgment regarding the poison pill by the Israeli Court – thanks to Stratasys’ request of the Judge – will not occur until late in this fall, long after the expiration of Nano’s special tender offer. Finally, replacing a majority of Stratasys’ entrenched board will not be achievable. Taking all this into account, we intend to ‘stand down’ on Stratasys. We shall continue with our alternative active M&A plans.”
Instead, Nano Dimension intends to sell its 14.1 percent of Stratasys and make other acquisitions, in addition to pursuing organic growth. The company will also decline to replace the Stratasys Board with its own nominees. In a future article, we will speculate in more detail about whom Nano might try to purchase, given its substantial amount of cash, but there are plenty of options on the table, some of which may bring near-equal prestige to the electronics 3D printing company.
3D Systems and Stratasys Discuss Merger
In the meantime, 3D Systems announced August 4, 2023, as the target date for completing its due diligence and merger agreement discussions with Stratasys. On July 13, the company made what it calls its “best and final” binding offer, which includes a termination fee for Stratasys’s planned merger with Desktop. Since July 17, the companies have been in discussions and 3D Systems has deemed that the cost synergies of the two firms is actually $110 million, rather than $100 million. However, after this announcement was made by 3D Systems, Stratasys followed with response stating that 3D Systems has not provided sufficient due diligence materials, as well as information related to potential negative revenue synergies.
“While 3D Systems has provided some cost synergy analysis, it’s only high level and lacks critical details that would substantiate their cost synergy claims. Despite the implication in 3D Systems’ press release that they have engaged cooperatively, we are still waiting for all this information from 3D Systems. For a transaction where the majority of the proposed merger consideration comes in the form of 3D Systems common equity, the Stratasys Board needs to understand these crucial details to make a responsible and informed decision,” Stratasys said in a press release.
The company also takes issue with the “best and final proposal” phrasing included in the most recent announcement from 3D Systems, suggesting that the Stratasys Board was hoping for further bartering. The company writes:
“Stratasys also notes that 3D Systems has added for the first time that their public proposal of July 13, 2023 is also their ‘best and final proposal’ as to the form and amount of merger consideration. 3D Systems does not state whether that was the case on July 13, 2023, whether, when or why their thinking as to negotiation has changed. Regardless of 3D Systems’ changing pronouncement and tactics, the Stratasys Board will evaluate any and all proposals holistically, taking into account the necessary due diligence and analysis, including regulatory analysis. If 3D Systems is serious about achieving a combination with Stratasys, the path forward lies with cooperation and transparency and not distorted public statements.”
This seems to imply that both firms are using public statements as means of concluding the deal on their terms. After such protracted grappling between Stratasys, the ostensible protagonist of the wrestling match, and Nano, the would-be heel, it is surprising to see Nano Dimension pull out. Despite the headache it caused, Stratasys may actually come out ahead due to the fact that its stock price has pushed up past the $20 mark since its January low. More importantly, 3D Systems has had to up its offer, even to the point of making it binding, until Nano backed down. Meanwhile, Desktop Metal may get a necessary lifeline from the termination fee while it looks to be acquired elsewhere. Or, better yet for all involved, it could be purchased by a 3D Systems-Stratasys combination.
As Danny Piper said in the latest Printing Money episode, however, the deal isn’t closed until it’s closed, so there are still developments to take place.