Nano Dimension acquires Stratasys stake – Stratasys implements ruthless plan to stop “hostile takeover”

Last week, a surprising event took place in the global 3D printing industry – the Israeli company Nano Dimension, producing quite niche systems for 3D printed electronics, took over a 12% share in one of the market leaders – the American-Israeli Stratasys. At the same time, it was truly sensational that Nano Dimension generates annual revenues of only 1.5% of what Stratasys does, and it owes its wealth and financial resources for this type of transactions only to the prosperity on the American stock exchange – being on it and so valued lower from the acquired company. A week after this event, the president of Nano Dimension slightly downplays the situation, reducing everything to a “typical” stock exchange investment in the assets of another entity, but Stratasys took it all to heart and took steps to prevent the acquisition of a controlling stake by implementing the so-called the “poison pill” tactic.

Recall: Nano Dimension manufactures specialized machines for additive manufacturing of electronics at the nano-technological level, which are to ultimately “change the face” of the electronic market. As for Polish (or even European) conditions, it is quite a nice business in terms of revenues. In 2020, the Israeli company generated revenues of $ 3.4 million, and in 2021 – $ 10.5 million. In total, in the last three years, the total revenue amounted to ~ $ 21 million. Unfortunately, in each of these years the company recorded a loss: in 2019 -14.8 million dollars, in 2020 -35.7 million dollars, and last year … -223.3 million dollars. Last year, sales and marketing costs alone amounted to twice as much as sales revenue.

At the same time, Nano Dimension is a kind of leader in the 3D printing industry in terms of structuring its financial solutions. In 2014, the company used a reverse merger to go public, which became an industry trend only at the turn of 2020 and 2021, raising over $ 1.5 billion from investors. As part of its acquisition strategy, Nano Dimension acquired DeepCube for $ 70 million, Nanofabrica for more than $ 50 million, Global Inkjet Systems for $ 18.1 million and most recently Admatec and Formatec for $ 12.9 million. But trying to take over Stratasys is a little bit higher…

The current market capitalization of the Stratasys is $ 1.32 billion compared to the $ 853 million of Nano Dimension. The difference in valuation is not colossal, but in revenues it is. The most recent full-year revenue for the Stratasys was $ 607 million, while the Nano Dimension was just $ 10.5 million.

In an interview with TCT Magazine yesterday, Nano Dimension Chairman and CEO Yoav Stern said that while his company is still relatively strong, it is doing well on the Nasdaq stock market, with revenues expected to be around $ 40 million this year – ten times more than two years ago and four times more than in the last year. Nano Dimension also has a global footprint, with offices in Boston, USA, Cambridge, UK, Lucerne, Switzerland, Munich, Germany; as well as in the Netherlands, Israel and Australia. It employs over 500 employees – 170 of which are engineers in materials science, robotics, machine learning, data science, mechatronics and software. They all serve hundreds of customers. The company also says it has about $ 1.2 billion in cash on its balance sheet without any debt.

When the news of Nano Dimension’s acquisition of 12.12% of Stratasys shares came out, some reports indicated the possibility that Nano Dimension was planning a takeover of the entire company – and hostile at that. In a press release, Stern admitted that there was a chance that Nano Dimension could increase its stake even further, but distanced himself on the question that Nano Dimension would one day acquire a majority stake.

Not necessarily. For now, we hope that Stratasys will deliver on its promises in the near future under the leadership of new management, but we may increase or decrease our investments in Stratasys depending on market conditions and other economic factors.

Stratasys decided, however, that he should not take the risk, and at the same time proved that the whole situation had come as a great surprise to him. The company announced that the Board of Directors unanimously adopted a “fixed-term shareholder rights” plan. It is usually implemented as a defensive strategy against hostile takeovers, giving existing shareholders the right to buy more shares at a discount to dilute the stake of the parties planning the takeover.

The plan is valid for 364 days and expires on July 24, 2023. It is designed to protect the long-term interests of Stratasys and its shareholders. By implementing this strategy, Stratasys believes it will “encourage” any person or company wishing to take control of the company to negotiate directly with its Board of Directors. Stratasys claims that the rights plan is intended to “reduce the likelihood that any entity, person or group will gain control of Stratasys or have a significant influence over Stratasys through the accumulation of Company shares in the open market without adequate compensation for the control of all Stratasys shareholders“. The company adds that its purpose is not to prevent or interfere with any actions regarding Stratasys that the Board deems to be in the best interests of the Company and its shareholders. Instead, it will position the Board of Directors to fulfill its fiduciary duties on behalf of all shareholders by ensuring that the Board of Directors has sufficient time to make informed judgment of any attempt to control Stratasys or exercise significant influence.

The implementation of the rights plan will result in Stratasys issuing one right for each ordinary share outstanding at the end of August 4, 2022. While the rights plan will take effect immediately, rights generally will only be enforceable if an entity, person or group acquires real property 15% or more of Stratasys outstanding shares in a transaction not approved by the Stratasys Council. In such a scenario, each right holder (other than the acquiring party) would have the right to purchase one common share at a purchase price of $ 0.01 per share. In addition, at any time after an entity, individual or group acquires 15% or more of the Company’s common stock, the Board of Directors may exchange one common stock of the Corporation for each right (other than rights held by such entity, person or group which would become invalid).

This strategy is called the “poison pill” in the publicly traded world and was recently adopted by Twitter’s management when Elona Musk announced its takeover. Twitter’s board of directors has approved a similar rights plan allowing shareholders to buy shares at a 50% discount.

To sum up, the situation is very developmental and today it is difficult to clearly assess what is (or was?) The real intention of Nano Dimension in the context of taking over a 12% stake in Stratasys? Maybe there was some kind of false start here? Maybe this is just a part of a larger plan? Maybe Nano Dimension just took advantage of the opportunity and never had any other goals than purely investment? One way or another, Stratasys’s absolute decision to allow shareholders to buy the company’s shares for 1 cent unequivocally ends the topic of further acquisitions in this way.

Source: www.tctmagazine.com & www.stratasys.com