“3D Succession”: Stratasys on the defensive after receiving another takeover bid and will Nano Dimension get along with 3D Systems?

Last week, I allowed myself to make a longer article about the very confusing and already a year long history of Stratasys takeover attempts by Nano Dimension and 3D Systems, with the takeover of Desktop Metal by the former in the background… If anyone is not following this “3D epic”, I encourage you to read the aforementioned text – here we will focus only on its continuation. Because despite the fact that only a week has passed since the last described events, more information has appeared that not only complicates the matter more – if it came true, it would affect the entire additive manufacturing industry in the world…

Well, last week it happened that the upcoming General Meeting of Stratasys Shareholders is to vote for a vote of confidence in the current company authorities, combined with a vote on the simultaneous appointment of completely new authorities, which would come entirely from Nano Dimension. In the meantime, the topic of an arbitration dispute between Stratasys and former shareholders of Origin, which was acquired by Stratasys in 2020, was raised, and with whom the company allegedly does not settle properly. Fortunately, I will not write about this today, focusing on the struggle for power in Stratasys itself.

At the beginning of the week, Nano Dimension made another takeover bid for Stratasys, but this time not all, not half – but 31.9-36.9% of its shares. The offer is the most generous yet, representing an 85% premium over the unchanged 60-day VWAP as of March 3, 2023. Offering $24 per share, this would increase Nano Dimension’s total stake in Stratasys to 46% – 51 %, which would de facto allow for the takeover of power in the company. Given that the company’s current share price is ~$19, that $5 extra may seem tempting to some shareholders.

By the way, it turned out that the concept of voting on the future of the current Stratasys authorities did not come from them at all, but from Nano Dimension, which already has enough influence to put it to the vote at all. This is a very difficult situation for Stratasys, because even if you manage to get out of it unscathed, the difference in votes may be small, which will prove its weakness and will not end the matter at all…

If that wasn’t enough, the statement attached to the last offer included a sentence that could turn the entire 3D printing industry upside down:

Nano Dimension will “support a review of strategic alternatives to further drive shareholder value, including through industry consolidation and possibly through a negotiated merger with 3D Systems, upon successful completion of a special tender.”

Thus, for the first time, the concept of creating a triumvirate straight from ancient Rome appeared, where the power over the entire 3D printing industry would be taken over by three Stratasys – 3D Systems – Nano Dimension, where the mere mention of the latter in this context sounds quite absurd today … However, the matter is quite serious that it was described by one of the largest financial newspapers in the world – the Financial Times. The article includes a statement by an anonymous banker who is involved in the ongoing discussions on this subject, who stated – “everyone agrees on one thing: consolidation should take place. The three companies (Stratasys, 3D Systems, Nano) should be together, and the question is: what is the order of operations?”

Taking into account all the information, industry knowledge and influence of Stratasys and 3D Systems on the global 3D printing market, it can be said that this would turn everything upside down in terms of local (national) distribution chains, availability of technological solutions and potential reactions of competitors (starting with GE, HP, SLM / Nikon, to EOS, Farsoon or TRUMPF). When we add to this the unpredictability and controversy of Yoav Stern – the president of Nano Dimension, we are dealing with a truly explosive mixture.

This is how it looks now:

• Stratasys is the undisputed leader in the field of industrial 3D printing in FDM / FFF and PolyJet technology and a growing player in the market of light-curing SLA resins and proprietary methods of producing parts from polyamide powders (SHS method)
• Stratasys holds nearly half of the shares in UltiMaker, formed from the merger of market leaders in desktop 3D printers – Ultimaker and MakerBot; which owns Thingiverse – the largest platform with free 3D printing models as well as CURA and GrabCad software; so if users of cheap Chinese 3D printers think that this case does not concern them – then yes, it also indirectly concerns…
• 3D Systems is one of the world leaders in the segment of 3D printing from metals (DMP method) and powdered plastics (SLS) and still the undisputed leader of industrial 3D printing in SLA technology; not only that – for several years it has been gaining an increasingly strong position in the bioprinting industry; it also includes Geomagic, a popular 3D modeling software
• Nano Dimension is by no means a leader, but it has plenty of money (still over $1 billion) raised from the NASDAQ stock exchange.

If such a merger were to take place, it would first affect the local distributors of Stratasys and 3D Systems 3D printers, which until now competed with each other on technologies, and now would have to start working together under one brand. Or – as was the case after the merger of Ultimaker with MakerBot, the existing distributors of one brand would cease to be them in favor of someone else? Secondly, it would lead to a major reshuffling of the industrial 3D printer market – GE, HP and Nikon might see a potential threat here, or some other industrial giant would decide it’s the right time to go shopping and grab “what else is on the market” left.”

The matter is so difficult for Stratasys that today it has issued a long – and quite “personal” letter to shareholders in which it “urges” them not to take the latest Nano Dimension offer seriously under any circumstances, because it will be very bad … You can read the letter here, I’ll just give you some most interesting “information”:

“We firmly believe that Nano Dimension Ltd.’s highly opportunistic, self-serving campaign to take control of Stratasys puts your investment at risk, threatening to derail our significant progress, dismantle Stratasys’ proposed combination with Desktop Metal and destroy Stratasys shareholder value. (…)

• If the Nano list is selected, Nano will be able to achieve its goal of taking control of Stratasys without paying Stratasys shareholders (…). To be clear, the selection of Nano’s bid would not automatically result in the closure of Nano’s partial tender offer, which is subject to various conditions that are unlikely to be met either on the currently proposed expiry date for Nano’s partial tender offer or on the date of Stratasys’ annual general meeting. (…)
• Nano’s Stratasys board candidates are unqualified, and its campaign to gain control of Stratasys is based on serving Nano’s interests. (…)
• “Six of the seven nominees to the Stratasys board are current directors of Nano, including its CEO Yoav Stern, meaning that there will be significant conflicts of interest between their roles at Nano and those of directors at Stratasys. How can a board of directors composed of directors of another additive manufacturing participant, five of whom report to Mr. Stern, be trusted to act independently and in the interest of all Stratasys shareholders? (…)

• Only two Nano nominees have sat on the board of a public company for almost the last 20 years, and most of the nominees have no experience in running 3D printing companies, as well as companies of a scale comparable to Stratasys. (…)
• The Nano campaign is an attempt to divert the attention of its own shareholders from a failing business model, history of value destruction and disappointing operational results. It’s no surprise that Nano has nominated six of its directors to the Stratasys board. Nano – and Mr. Stern – is a bad history of corporate governance and mismanagement, and a blatant lack of respect for its own shareholders. (…)
• The Nano business continues to consume significant cash, including nearly $28 million in net cash used in operations in the first quarter of 2023. While Nano reported net income of over $22 million in the quarter, its investment in Stratasys generated more than $40 million USD in profit during that time, meaning that its operations are loss-making, as evidenced by negative adjusted EBITDA of USD 23.7 million in the first quarter. (…)
• Note: Mr. Stern’s destructive behavior is nothing new. Mr. Stern was removed as interim president and CEO of Magal Security Systems (“Magal”) in 2009 after causing what Magal described as “almost irreparable damage to the morale of the remaining employees” who “operated in a hostile environment and were terrified by his management style. (…)

Phew…

So far, all of Stratasys’ statements to shareholders on this matter have been very diplomatic and businesslike. This time you can see that the company is a bit against the wall and refers to stories that happened several years ago… These are certainly very interesting and plausible stories, but the nature of this letter is completely different from everything that has been announced before.

In just a few weeks there will be a great confrontation. I’m more than sure something else will happen in the meantime…

Source: www.businesswire.com & www.tctmagazine.com