Stratasys Ltd. and Desktop Metal announced that they have entered into a definitive agreement whereby the companies will combine in an all-stock transaction valued at approximately $1.8 billion. And the deal unites the polymer strengths of Stratasys with the complementary industrial mass production leadership of Desktop Metal’s brands, creating an additive manufacturing company that is expected to be well-positioned to serve the evolving needs of customers in manufacturing.
Stratasys and Desktop Metal are expected to generate $1.1 billion in 2025 revenue with significant upside potential in a total addressable market of more than $100 billion by 2032.
Under the terms of the agreement – which was 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. And 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.
Following the closing of the deal, 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.
Benefits of the Deal
— The deal establishes a uniquely scaled additive manufacturing company that is expected to be one of the largest companies in the industry, targeting $1.1 billion in 2025 revenue. And there are significant 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 is going to have a broad product portfolio and attractive positions across multiple additive manufacturing technologies and solutions. Upon the closing of the deal, more than 50% of pro forma combined company revenue is expected to be derived from end-use-parts manufacturing and mass production, one of the fastest-growing segments in additive manufacturing. Plus the combined company is expected to offer customers end-to-end solutions from designing, prototyping, and tooling to mass production and aftermarket operations across the entire manufacturing lifecycle.
— The deal brings together complementary IP portfolios with more than 3,400 patents and pending patent applications. And together, Stratasys and Desktop Metal have invested over $500 million in R&D over the last 4 fiscal years. Plus the combined company will have one of the largest R&D and engineering teams in the industry with over 800 scientists and engineers focused on driving innovation across a differentiated materials library.
— This combination brings together complementary products and technologies that cover a wide range of industry verticals and use cases. And the combined company is expected to have superior global go-to-market capabilities with enhanced market access for recognizable brands, backed up by premier customer support capabilities. With over 27,000 industrial customers, the combined company will have a large customer base across industries, materials and applications to drive significant recurring revenue from consumables.
— This 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. And the combined company is expected to generate an additional $50 million in annual run-rate revenue synergies by 2025 from enhanced market access.
— The combined company is targeting 10%-12% adjusted EBITDA margins in 2025. And 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.
Following the close of the deal, Dr. Yoav Zeif (CEO of Stratasys) will lead the combined company as Chief Executive Officer together with Fulop as Chairman of the Board. And upon completion of the transaction, the combined company’s Board of Directors will be comprised of 11 members, 5 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.
KEY QUOTES:
“Today is an important day in Stratasys’ evolution. 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 look forward to building on the complementary strengths of the combined business and leveraging the strong brand equity across the portfolio to deliver enhanced value to shareholders, customers, and employees.”
— Dr. Yoav Zeif, CEO of Stratasys
“We believe this is a landmark moment for the additive manufacturing industry. 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. We look forward to combining with Stratasys to deliver profitability while driving further innovation for a larger customer base and providing expanded opportunities for our employees.”
— Ric Fulop, Co-founder, Chairman and CEO of Desktop Metal
