Comparing the Nano Dimension offer for Stratasys vs. Other Alternatives: A Nano Dimension Perspective

5 Mins read
Electronics 3D printing andNano Dimension offer for Stratasys
Electronics 3D printing/Source: Nano Dimension

Nano Dimension Ltd., a leading supplier of Additively Manufactured Electronics and multi-dimensional polymer, metal, and ceramic Additive Manufacturing 3D printers, provided Stratasys shareholders with additional informational resources illustrating its views on the Nano Dimension offer for Stratasys and comparing it to Desktop Metal’s offer for the merger and 3D Systems Corp.’s unsolicited proposal.

Nano Dimension has also released an investor presentation and a website dedicated to the tender offer, Stratasys Value Now.

Nano Dimension offer for Stratasys

On May 25, 2023, Nano Dimension launched a Special Tender Offer to purchase between 38.8% and 40.8% of Stratasys‘ outstanding ordinary shares for $18.00 in cash. If the special tender offer is successful, Nano Dimension’s beneficial ownership of Stratasys will increase to between 53% and 55% of the company’s outstanding ordinary shares, including the approximately 14.1% of Stratasys’ outstanding ordinary shares that Nano Dimension currently owns.

“Stratasys shareholders face a simple choice: certain all-cash value at a premium or two alternative transactions, each of which we believe present a high degree of uncertainty. We are confident our $18.00 per share tender offer is the right path for Stratasys shareholders and delivers greater value than what Stratasys can create independently, or via a transaction with Desktop Metal or 3D Systems. Two lemons don’t automatically create lemonade, just by squeezing them together.”

– Yoav Stern, Nano Dimension’s Chairman and CEO

Stern continued, “We remain committed to completing the special tender offer, to driving much needed improvement in leadership and performance at Stratasys and to creating a path to establishing a preeminent leader in the rapidly growing AM market. We intend to do so by focusing on gross margins, EBITDA and earnings-per-share profitability to create value for Stratasys’ shareholders, in contrast to current management’s empty promises of becoming “a billion-dollar company” every two to three years, only to deliver further cash burn and value destruction.”

Stern also highlighted an example involving the CEO of Stratasys where the CEO sold MakerBot in September 2022, but it resulted in no proceeds and required additional funding for the separation. Stratasys had acquired MakerBot in 2013, and in 2012, it generated $15.7 million in revenue. However, the acquisition was made under the leadership of a former CEO who is now a board member of Stratasys and has proven to be a costly decision, amounting to over $400 million for Stratasys and its shareholders. The author believes that their tender offer presents an opportunity to change this trajectory and unlock the full potential of Stratasys.

Stern finally concluded by saying, “With a successful outcome of the tender, we will continue to execute on our strategic plan to drive value creation for our shareholders and other stakeholders, both in Nano and in Stratasys, and the profitability of both will benefit all. Our management will be compensated based on the performance of Stratasys’ operations, no less than Nano’s, as Stratasys will be our main business asset.”

The presentation depicts Nano Dimension’s perspectives on the benefits of its all-cash special tender offer to Stratasys shareholders, as well as the potential downside of the pending Desktop Metal merger and unsolicited offer from cash-strapped 3D Systems – two transactions involving volatile shares and insignificant cash components from cash-strapped companies. The following is a synopsis of the presentation:

Value in Nano Dimension’s Offer for Stratasys Shareholders

  • The Company’s special tender offer provides Stratasys shareholders with a guaranteed and immediate premium in the form of an all-cash value of $18.00 per share.
  • The offer price represents a premium over Stratasys’s historical trading levels, including a 26% premium over the unaffected closing price on March 3, 2023.
  • The Company has approximately $1 billion in cash and cash equivalents to successfully complete the special tender offer.
  • The transaction has the full support of Nano Dimension’s management team and Board of Directors, and it does not require shareholder approval. The deal has been officially approved by Israel’s District Court.
  • The proposed merger with Desktop Metal would result in significant Stratasys dilution because it would necessitate paying a premium and providing financial support while offering limited upside potential.

On Merger with Desktop Metal

Desktop Metal AM 2.0 portfolio
Desktop Metal AM 2.0 portfolio/Source: Desktop Metal

Since its initial public offering in 2020, Desktop Metal, a former special purpose acquisition company (SPAC), has suffered significant losses and destroyed shareholder value. Market data as of May 30, 2023, show a $3.8 billion loss, accounting for 85% of its equity value.

If the proposed merger between Desktop Metal and Stratasys goes through, Stratasys shareholders will see their ownership in the combined company reduced to only 59%. This means that shareholders would give up 41% of their ownership in exchange for a company that is currently losing money.

The merger process is expected to be lengthy and uncertain, requiring votes from both Desktop Metal and Stratasys shareholders as well as regulatory approval. Shareholders have already filed lawsuits against both companies for their corporate governance practises.

The proposed merger structure, which involves stock exchange, contradicts Stratasys’ claim that its own stock is undervalued. Stratasys, a cash-generating company, would pay a premium price for an underperforming Desktop Metal by using its ordinary shares as consideration, sacrificing profitability and capital preservation for a costly addition to its revenue.

With the proposed merger, Stratasys shareholders are offered uncertain and longer-term value based on theoretical synergies and Desktop Metal’s unproven growth story. These potential benefits are not offset by the announced cost synergies, because roughly half of the estimated $50 million annual run-rate synergies rely on corporate cost elimination, which takes time to implement.

On Acquisition by 3D Systems

First ever 3D Printed part through Stereolithography /Source: 3D Systems

The unsolicited proposal from 3D Systems provides even less certainty, especially if it is accepted as a superior proposal by Stratasys. Given Stratasys’ previous financial difficulties, the cash consideration offered is only $7.50, leaving Stratasys shareholders uncertain about the value of 3D Systems’ stock.

Because it requires two shareholder votes and regulatory approval, the potential transaction with 3D Systems introduces significant uncertainty. Furthermore, 3D Systems’ balance sheet is volatile and highly leveraged, with significant loans and liabilities.

According to Nano, 3D Systems is depleting all of its cash reserves for this transaction and is also losing money on an operating basis. This implies that 3D Systems may need to raise capital, which would dilute Stratasys shareholders’ holdings.

Stratasys shareholders would primarily receive minority stock in 3D Systems under the proposed transaction, increasing transaction risk and uncertainty. In four of the last five years, 3D Systems has missed forecasts, destroyed value, and suffered financial losses.

Accepting the proposal also triggers the Desktop Metal transaction’s termination fee if Stratasys determines that the 3D Systems proposal is superior.

Special Tender Offer

Nano Dimension has filed a tender offer statement on Schedule TO with the SEC, along with an offer to purchase, outlining the terms and conditions of the special tender offer. The special tender offer will expire at 11:59 p.m. EDT on Monday, June 26, 2023, unless extended or terminated earlier in accordance with the offer to purchase and the applicable SEC and Israeli law rules and regulations.

The special tender offer is subject to certain conditions, including that at least 5% of the issued and outstanding Stratasys shares are validly tendered and not properly withdrawn, that at least 53% of the issued and outstanding Stratasys shares when aggregated with the Stratasys shares held by Nano are validly tendered and not properly withdrawn, and that the Stratasys board of directors redeem its Rights Plan, dated July 25, 2022, and any Rights that may be issued.

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Manufactur3D is an Indian Online 3D Printing Media Platform that reports on the latest news, insights and analysis from the Indian and the Global 3D Printing Industry.
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