Stratasys, a leading three-dimensional printing company, has officially rejected the latest merger proposal from rival company 3D Systems. Instead, Stratasys is pressing forward with an all-stock merger with Desktop Metal.
3D Systems’ proposal offered $7 in cash and 1.64 newly issued 3D Systems shares for each Stratasys share. This equates to a value of approximately $15.26 per Stratasys share as of Monday’s market close. However, Stratasys considers this offer to be inferior to the Desktop Metal agreement for several reasons.
Despite 3D Systems’ premium offer, it only represents a 3% increase over the closing price of Stratasys shares on May 24. Additionally, it is only a 15% premium over Monday’s closing price. Furthermore, the offer is actually lower than a bid made by 3D Systems in July due to subsequent declines in their share price.
Issues with 3D Systems
During mutual due diligence, Stratasys discovered several issues with the proposed merger with 3D Systems. For starters, 3D Systems’ second-quarter earnings report fell short of their own guidance and analyst expectations. They also had to lower their annual estimates. Another concern for Stratasys is the potential challenges to revenue from 3D Systems’ partnership with Align Technology as Align transitions to multiple-source printing technology.
Structural Challenges and Synergy Potential
Stratasys believes there are structural challenges to 3D Systems’ profitability path. They also disagree with the synergy potential claimed by 3D Systems, seeing it as lower than what is being stated.
With the rejection of 3D Systems’ merger proposal and the end of negotiations, Stratasys reaffirms its unanimous support for the previously-agreed upon merger with Desktop Metal.