3D Systems, located in Rock Hill, South Carolina, USA, has presented an improved proposal to Stratasys following a recent meeting between the directors of both companies. Stratasys has acknowledged the proposal, confirming that it has shown material cost synergies arising from a merger that would translate into hundreds of millions of dollars of shareholder value. However, Stratasys has concluded that the current market price of 3D Systems shares renders the proposal inadequate.
Furthermore, Stratasys has informed 3D Systems that despite the latter’s good faith efforts to reach a negotiated transaction for the benefit of all shareholders, Stratasys’ board of directors continues to support the Desktop Metal merger as its preferred alternative. As such, the Stratasys board is reportedly not interested in any further discussions or proposals from 3D Systems regarding a possible merger between the two companies.
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3D Systems president and CEO Dr Jeffrey Graves stated, “We listened to shareholder feedback and made a strong effort to reach a friendly transaction but it seems there is no price that would satisfy the Stratasys Board. Shareholders of Stratasys have seen their board turn down offer after offer, watching only the consistent destruction of value in the meantime. The latest game appears to be an attempt to ‘run out the clock’ on supposed discussions with us, while always moving ahead with the massively value-destructive merger with Desktop Metal. We are confident that shareholders will support our combination and send an unequivocal message to the Stratasys board that they can no longer protect themselves while fiddling away shareholder value.”
The complete terms of 3D Systems’ revised proposal to Stratasys were included in a merger agreement, along with a full set of disclosure schedules. This was delivered to Stratasys on September 6, 2023, and builds upon the terms of the binding merger agreement submitted on July 13, 2023, and filed publicly with the SEC. The updates to the July 13 offer are as follows:
- Superior Consideration: In response to Stratasys’ request for a consideration mix consisting of less cash and a higher percentage of stock, primarily to allow Stratasys shareholders to participate in more of the agreed-upon synergies’ upside, 3D Systems proposes that Stratasys shareholders receive $7.00 in cash and 46% ownership (an exchange ratio of 1.6387 based on the latest share count disclosure) of the combined company for each of their shares; this is an increase from 44% in 3D Systems’ July 13 offer.
- Certainty of Closing: The revised offer now includes a reverse termination fee of $50 million payable to Stratasys if the merger fails to obtain the required antitrust clearances; this demonstrates 3D Systems’ confidence in obtaining all necessary clearances.
- Retention of Key Talent: 3D Systems recognises the critical role that management, employees, and other key contributors of both Stratasys and 3D Systems will play in driving value creation at the combined company; therefore, the company proposes to create a $10 million retention programme to be allocated among employees of each company on an inverse basis to the projected pro-forma ownership by their respective shareholders.
- Management: 3D Systems has responded positively to Stratasys’ request for a key leadership role for Stratasys’ current CEO in the combined company; the aim is to ensure a smooth integration of the two companies and to maximise short- and long-term shareholder value creation
All other terms outlined in 3D Systems’ revised proposal remain substantially the same as those included in the July 13 signed merger agreement. This includes 3D Systems’ commitment to pay the $32.5 million termination fee owed by Stratasys to Desktop Metal upon Stratasys’ exit from its existing merger agreement with Desktop Metal and entrance into this new merger agreement with 3D Systems.
Graves continued, “This proposal demonstrates our continued, unwavering belief that a combination of 3D Systems and Stratasys brings unique value. It creates unparalleled scale, significant cost synergies to enhance financial performance and supports long-term growth investments, and a comprehensive technology portfolio to support customers as they increasingly adopt 3D printing in their production environments. We believe that a combination of our two companies is clearly superior to any other potential combination in our industry, and that the vast majority of shareholders in both companies share our view. We will continue to evaluate our options in completing this important transaction to transform the Additive Manufacturing industry.”
Goldman Sachs & Co. LLC is acting as exclusive financial advisor, and Freshfields Bruckhaus Deringer (US) LLP, together with Herzog, Fox & Neeman in Israel, is acting as legal counsel to 3D Systems.