3D Systems and Stratasys merger proposal “superior” as Nano Dimension and Desktop Metal acquisition hopes fade

A conclusion to the Stratasys, 3D Systems, Desktop Metal, and Nano Dimension mergers and acquisitions story may be reached as early as the end of this week.

3D Systems (NYSE:DDD) is anticipating a swift termination of the merger agreement with Desktop Metal, Inc., following Stratasys Ltd.’s (NASDAQ: SSYS) decision to consider 3D Systems’ merger proposal as a ‘Superior Proposal.’ The decision comes after Stratasys shareholders expressed their lack of support for the Desktop Metal merger, according to 3D Systems. Previously, activist investor and Stratasys minority shareholder The Donerail Group published an open letter advocating against the Desktop Metal transaction and supporting 3D Systems.

3D Systems has already signed a merger agreement with Stratasys, which is now in escrow, and expects Stratasys to countersign by the end of this week. The proposed deal would see Stratasys shareholders receive $7.50 per share in cash and 1.5444 newly issued shares of the combined company for each Stratasys ordinary share, resulting in Stratasys shareholders owning approximately 44% of the combined company and receiving approximately $540 million in cash at the time of the transaction’s consummation.

3D Systems has committed to paying any termination fees due to Desktop Metal upon the termination of the Desktop Metal merger agreement and Stratasys’ countersignature of the 3D Systems merger agreement. 

Dr. Jeffrey Graves, President and CEO of 3D Systems, expressed confidence in the potential of the combined company to lead in the additive manufacturing industry and deliver long-term profitable growth. He urged the Stratasys Board to act quickly to make the transaction a reality. 

“We are pleased with the Stratasys Board’s determination. We anticipate prompt termination of the Desktop Metal merger agreement and countersignature of the agreement to combine 3D Systems and Stratasys so that we can deliver our collective stakeholders the unparalleled benefits of the envisioned combined company,” said President and CEO, Dr. Jeffrey Graves. “Together, 3D Systems and Stratasys are well-positioned to capture the benefits of scale needed to lead in the additive manufacturing industry and deliver long-term profitable growth. We reiterate our confidence in the strength of the combined financial profile of 3D Systems and Stratasys, including our ability to realize $100 million of synergies jointly identified by our two management teams during due diligence exercises in September 2022.”

“Shareholders have spoken that a combination between 3D Systems and Stratasys presents the most compelling opportunity for the additive manufacturing industry, and it is now time for the Board of Stratasys to move quickly to make this transaction a reality. If the Stratasys Board engages promptly, we believe that Stratasys should be able to sign the merger agreement this week,” said the 3D Systems CEO and President. 

Stratasys responds to takeover activity

Stratasys made eight SEC filings yesterday alone. There is a notable shift in tone, with the Stratasys board warming to the 3D Systems offer, but the language is rather more muted than that of 3D Systems.

A press release on July 17th states that Stratasys’ Board of Directors has unanimously agreed that the revised unsolicited acquisition proposal by 3D Systems Corporation, made on July 13, 2023, could potentially result in a “Superior Proposal” as defined in Stratasys’ existing merger agreement with Desktop Metal. The proposed deal includes $7.50 in cash and 1.5444 newly issued shares of 3D Systems common stock per Stratasys share.

However, before confirming 3D Systems’ proposal as a “Superior Proposal,” Stratasys will conduct a thorough due diligence of 3D Systems’ business and prospects. This includes closely examining 3D Systems’ projected $100 million synergies and its revenue growth and profitability. Stratasys also plans to negotiate terms with 3D Systems while adhering to the requirements of the Desktop Metal merger agreement.

Stratasys entered into a merger agreement with Desktop Metal on May 25, 2023, in an all-stock transaction. Despite the potential new proposal from 3D Systems, Stratasys remains committed to the terms of the Desktop Metal merger agreement. The Stratasys Board has not yet officially declared 3D Systems’ revised proposal as a Superior Proposal and continues to support the transaction with Desktop Metal.

One thing remains unchanged, Stratasys, in no uncertain terms, is advising stakeholders against the Nano Dimension partial offer. In a letter sent to Shareholders on July 17th, Yonah Lloyd Stratays, CCO and VP of Investor Relations writes, “Yoav Stern, Nano’s Chairman, and CEO, cannot be trusted, has made misrepresentations about Stratasys and is not qualified to manage Stratasys. Since Yoav Stern’s appointment, Nano has spent more than $500 million in cash and increased its revenue by only $44 million.”

In a similar vein, Nano Dimension is unimpressed with the Stratasys board. A press release from July 17th calls for “Stratasys shareholders to replace the current Stratasys Board with Nano’s seven highly qualified director nominees at Stratasys’s upcoming Annual General Meeting to be held on August 8, 2023.”

Nano Dimension has also announced the expiry of the waiting period, as required under U.S. federal law, which requires notification of the Federal Trade Commission (FTC) and the DOJ about M&A proposals in particular industries. The Hart-Scott-Rodino (HSR) Act is intended to allow antitrust authorities to review mergers and acquisitions.

HSR clearance, according to Nano Dimension, or the expiry of the waiting period, means “no further regulatory review by U.S. antitrust authorities is required in connection with the special tender” is expected. 

More updates on the Stratasys, 3D Systems, Nano Dimension, and Desktop Metal merger activity

A key date to watch will be August 8th, when the Stratasys AGM is scheduled to take place. Those who were shareholders of record at the close of business on July 5th, 2023, are entitled to vote at this meeting.

Nano Dimension has sweetened their offer, raising the price from $20.05 to $24.00 per Stratasys share in a filing dated July 10th.  

On July 11th, a press release issued by Murchinson Ltd., an approximately 5.9% shareholder of Nano Dimension, announced that the U.S. District Court for the Southern District of New York has dismissed the Section 13(d) claims filed by Nano Dimension against Murchinson and other shareholders. The court also dismissed the state law claims without prejudice, rendering Nano Dimension’s Section 13(d) claims against Murchinson and Anson Advisors, Inc. as “moot.”

Murchinson expressed satisfaction with the court’s decision, characterizing the lawsuit filed by Nano Dimension in March as a frivolous attempt to suppress shareholders’ voices. Murchinson noted that shareholders had voted overwhelmingly in favor of its proposals, including removing Chairman Yoav Stern, at the Company’s Special General Meeting of Shareholders held in March.

Despite the clear message from shareholders, Murchinson criticized Nano Dimension for its continued efforts to maintain the status quo of underperformance and poor corporate governance under Stern’s leadership. Murchinson remains committed to holding Stern and the incumbent directors accountable and has filed an anti-SLAPP lawsuit, seeking $5 million in damages to be paid by the incumbent directors personally.

Murchinson also pointed out that Nano Dimension, which was quick to publicize the lawsuit filing in March, has yet to address or disclose the court’s decision. Murchinson criticized this lack of transparency and selective disclosure as inconsistent with a board of directors acting in the best interests of all stakeholders.

While little in life is certain, one thing that should not be underestimated is the tenacity of Nano Dimension’s CEO and former F15 pilot. Nano Dimension has conducted significant due diligence across the 3D printing industry, and if the Stratasys deal goes to 3D Systems, it would not be unreasonable to assume Yoav Stern has his sights on a new target and is already preparing to engage.

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Featured image shows Nano Dimension offices in Munich. Photo by Michael Petch.