Stratasys to Merge With Desktop Metal in $1.8 Billion Transaction
Combined company anticipated to reach $1.1 billion in revenue with adjusted EBITDA margin of 10%-12% in 2025.
May 25, 2023
Stratasys and Desktop Metal are expected to generate $1.1 billion in 2025 revenue, with projected upside potential in a total addressable market of more than $100 billion by 2032.
Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Desktop Metal stockholders will receive 0.123 ordinary shares of Stratasys for each share of Desktop Metal Class A common stock. This represents a value of approximately $1.88 per share of Desktop Metal Class A common stock based on the closing price of a Stratasys ordinary share of $15.26 on May 23, 2023.
Gauging the merger's potential impact on the 3D printing industry, Terry Wohlers, head of advisory services and market intelligence, Wohlers Associates, powered by ASTM International, shared some insights.
“Honestly, it’s impossible to know whether the AM industry will benefit from [the merger]. It could, but many mergers and acquisitions do not contribute favorably. With Stratasys’ strong distribution channel, the combined company will support the sale of Desktop Metal’s products and services, thus potentially helping to expand the AM industry,” Wohlers says. In effect, the real impact may rest with Stratasys, according to Wohlers who suggests, “It could make Stratasys more competitive.”
After the closing of the transaction, which is expected to occur in the fourth quarter of 2023, existing Stratasys shareholders will own approximately 59% of the combined company, and legacy Desktop Metal stockholders will own approximately 41% of the combined company, in each case, on a fully diluted basis.
“Today is an important day in Stratasys’ evolution,” says Dr. Yoav Zeif, CEO of Stratasys. “The combination with Desktop Metal will accelerate our growth trajectory by uniting two leaders to create a premier global provider of industrial additive manufacturing solutions. With attractive positions across complementary product offerings, including aerospace, automotive, consumer products, healthcare and dental, as well as one of the largest and most experienced R&D teams, industry-leading go-to-market infrastructure and a robust balance sheet, the combined company will be committed to delivering ongoing innovation while providing outstanding service to customers.”
“We believe this is a landmark moment for the additive manufacturing industry,” says Ric Fulop, co-founder, chairman and CEO of Desktop Metal. “The combination of these two great companies marks a turning point in driving the next phase of additive manufacturing for mass production. We are excited to complement our portfolio of production metal, sand, ceramic and dental 3D printing solutions with Stratasys’ polymer offerings. Together, we will strive to build an even more resilient offering with a diversified customer base across industries and applications in order to drive long-term sustainable growth.”
The merger, notes Wohlers, will give Stratasys hundreds of additional metal- and dental-related patents. “As a result, it will bring the company’s intellectual property portfolio to a total of 3,400 granted and pending patents,” he says. “The merger will result in the largest AM company in the world.”
Strategic and Financial Benefits of Transaction
- The transaction establishes a scaled additive manufacturing company that is expected to be one of the largest companies in the industry, targeting $1.1 billion in 2025 revenue. In addition, there are opportunities as additive manufacturing increases its offerings in mass production, with expected industry growth to more than $100 billion by 2032.
- Bringing together Stratasys’ and Desktop Metal’s additive manufacturing platform offerings, the combined company will have a broad product portfolio and positions across multiple additive manufacturing technologies and solutions. Upon close, more than 50% of pro forma combined company revenue is expected to be derived from end-use-parts manufacturing and mass production.
- The transaction brings together complementary IP portfolios with more than 3,400 patents and pending patent applications. Together, Stratasys and Desktop Metal have invested over $500 million in R&D over the last four fiscal years.
- This combination brings together complementary products and technologies that cover a range of industry verticals and use cases. The combined company is expected to have global go-to-market capabilities with enhanced market access for recognizable brands, backed up by premier customer support capabilities.
- The combined company is expected to generate approximately $50 million in additional annual run-rate cost synergies by 2025, due primarily to cost reductions in sales, general and administrative expenses, supply chain management and optimization of operational processes.
- The combined company is targeting 10%-12% adjusted EBITDA margins in 2025. Together, Stratasys and Desktop Metal had $437 million of cash and cash equivalents as of the first quarter of 2023, and this transaction accelerates the combined company’s financial flexibility through a well-capitalized balance sheet to drive future growth.
Leadership and Governance
After the transaction close, Dr. Zeif will lead the combined company as chief executive officer together with Fulop as chairman of the board. Upon completion of the transaction, the combined company’s board of directors will be comprised of 11 members, five of whom will be selected by Stratasys, and five of whom will be selected by Desktop Metal, plus Dr. Zeif as CEO. Stratasys Chairman Dov Ofer will serve as lead independent director of the combined company.
Timing to Close and Approvals
The transaction, which is expected to be completed in the fourth quarter of 2023, is subject to customary closing conditions, including the approval of Stratasys’ shareholders and Desktop Metal’s stockholders and the receipt of certain governmental and regulatory approvals.
Visit www.NextGenerationAM.com for more information.
Sources: Press materials received from the company and additional information gleaned from the company’s website.
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