Dark clouds are gathering over the biggest merger in the history of 3D printing. Nobody wants Stratasys to take over Desktop Metal…

It’s July, it’s summer holidays and usually nothing interesting happens in the 3D printing industry… With one exception! The soap opera related to the attempts to take over Stratasys, which has been going on for a year, is in full swing, and the following days bring more and more surprising twists. This story is getting more and more confusing, and even we, who have been covering these events from the very beginning, are slowly getting lost in the sheer volume of plots. Just in the last few days: Stratasys rejected (for the nth time) takeover bids by Nano Dimension and 3D Systems, selected Stratasys shareholders began to express their growing dissatisfaction, Stratasys management decided to ask for a vote of confidence at the next general meeting shareholders and lead to the final confrontation with Nano Dimension, to be sued by the shareholders of Origin acquired in 2020 in connection with the violation of the acquisition agreement… Phew…

Let’s start with a short summary: last year, Nano Dimension – a relatively small company specializing in the production of specialized 3D printers for nanoprinting of consumer electronics, took over a 14% stake in Stratasys and a moment later began submitting further takeover bids for the company. If it’s relatively small, where does it get the money for it? From the funds obtained on the New York Stock Exchange NASDAQ, which, instead of allocating them to the development of its technology, it allocates to acquisitions of other companies dealing in quite different areas of the technology business. This policy does not sit well with Nano Dimension’s key shareholders, who have been seeking to take over the company and remove its controversial CEO, Yoav Stern, from around the same time as the acquisition of the aforementioned 14% stake in Stratasys.

In general, for most of the first half of the year, no one took this topic too seriously, but things took a completely new turn when at the end of May 2023, when Stratasys announced that it would acquire Desktop Metal in a deal worth $ 1.8 billion. This surprising and shocking decision met with a strong reaction from Nano Dimension, which began to submit more – and given the current share price of Stratasys, quite lucrative bids to take over either the entire company, or at least its controlling stake.

Then suddenly 3D Systems joined the game, which decided that they should take over Stratasys, and that this would be the best solution for everyone. At the same time, both Nano Dimension and 3D Systems claim that the merger of Stratasys with Desktop Metal is highly unfavorable and only they guarantee a real increase in the profits of the merged companies and are the best possible choice for shareholders. Stratasys claims otherwise and successively rejects all takeover offers, constantly proclaiming that their acquisition of Desktop Metal is the most correct solution…

Still keeping up? Then read on…

Yesterday, Stratasys announced the agenda of the upcoming general meeting, where the entire board of the company is to be voted on. Shareholders will be given a choice of whether to vote to retain the current lineup or replace it with a board from Nano Dimension? The current eight-member management board includes: Scott Crump – the founder of the company and the creator of the FDM technology and David Reis – the long-term president of the company, who is responsible, among others, for for her merger with Objet and the acquisition of MakerBot Industries. In the absence of a vote of approval, people associated exclusively with Nano Dimension, headed by the aforementioned Yoav Stern, will be appointed to the board.

Shareholders will only be able to vote “FOR” the current Stratasys board or “FOR” the board with Nano Dimension – there will be no “AGAINST” votes. The list of candidates who receive the majority of votes cast “FOR” (excluding abstaining votes and shareholders not voting) will be considered as selected by the shareholders. It promises to be a story straight from the finale of the fourth season of “Succession” …

At this point, the question arises: “how could this even happen?” Why would Stratasys even allow such a vote? One hypothesis is that Nano Dimension already has enough shares to put this agenda item on. It is possible that he has the support of other Stratasys shareholders – for example Donerail Group, which a few days ago expressed disapproval of serial rejections of takeover bids – in particular the one made by 3D Systems? The alternative scenario is that Stratasys management is confident of a favorable outcome and brings about a winning vote to close the issue of being taken over by Nano Dimension once and for all. However, it is risky – if the current management wins only by a small number of votes, it will be a proof of its weakness rather than strength, and then the pressure to break the integration process with Desktop Metal and accept the offer of 3D Systems may become even more insistent …

But this is not the end of Stratasys’ troubles… Former Origin shareholders entered into an arbitration dispute with Stratasys because, in their opinion, there was a violation of the acquisition agreement signed back in 2020. A few days ago, they filed a lawsuit to prevent Stratasys from merging with Desktop Metal not to “disperse his assets” before the arbitration dispute is resolved.

Former Origin shareholders say Stratasys breached the takeover agreement, misled former shareholders and fraudulently enriched itself by refusing to pay them the agreed value of their company. The lawsuit said Origin was purchased for “approx. $60 million upfront and another $40 million in three-year operating profit,” but “stratasys senior management and board members engaged in a series of misstatements and false statements to deprive former shareholders of their negotiated remuneration.”

The additional profit is contingent on the three-year period in which the sales of Origin products were to achieve a certain revenue. The start date for profits was initially set to July 1, 2021, but was later changed to February 2022, which is when Origin products were supposed to be “generally available”. Former Origin shareholders disagree with this change and the lack of accrual of profits. They cite Stratasys’ statements about the value Origin has provided to the company, saying that it generated “the largest year-on-year profit growth in its recent history and contributed significantly to the company’s value growth, with revenue projected in the hundreds of millions dollars.” Now, as Stratasys prepares to merge with Desktop Metal, former Origin shareholders are concerned that the company will not pay what they believe was owed in the acquisition.

Stratasys still has time to make payments to former shareholders, but does not intend to do so until the end of the period set in the acquisition agreement, i.e. until July 1, 2024. Origin shareholders say in the lawsuit that they do not want to stand in the way of a merger with Desktop Metal, but they want assurances that assets and liabilities related to former Origin shareholders will not then be separated and that arbitration can be fairly resolved.

Stratasys is going through a really tough time… The Desktop Metal acquisition is due to close at the end of this year, but with all the complications and turmoil above, any scenario is possible…

Source: www.tctmagazine.com & www.3dprint.com
Photo: www.pixabay.com