3D printing firms Stratasys, Desktop Metal announce $1.8B merger

In a 3D printing merger, Stratasys Ltd. is combining with Desktop Metal Inc. in an all-stock deal valued at $1.8 billion.

Officials with Stratasys in Rehobot, Israel, and with Desktop Metal in Burlington, Mass., said that the deal "unites the polymer strengths of Stratasys with the complementary industrial mass production leadership of Desktop Metal's brands."

They added that the merger "creates an additive manufacturing company that is expected to be well-positioned to serve the evolving needs of customers in manufacturing." The combined firm is expected to generate sales of $1.1 billion by 2025.

The deal has been approved by both firms' boards, but still requires shareholder approval. Under terms of the merger, Desktop Metal stockholders will receive 0.123 ordinary shares of Stratasys for each share of Desktop Metal Class A common stock. When the transaction closes in the fourth quarter, existing Stratasys shareholders will own approximately 59 percent of the combined firm, with legacy Desktop Metal stockholders owning the remaining 41 percent.

In a news release, Stratasys CEO Yoav Zeif said that 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."

He added that the two firms have complementary product offerings, including aerospace, automotive, consumer products, health care and dental. Stratasys and Desktop Metal also have "one of the largest and most experienced R&D teams, industry-leading go-to-market infrastructure and a robust balance sheet."

Desktop Metal co-founder, Chairman and CEO Ric Fulop said that the merger "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."

More than half of pro forma combined company sales is expected to come from end-use-parts manufacturing and mass production, which officials said is one of the fastest growing segments in additive manufacturing. The combined company will be able to offer customers end-to-end solutions from designing, prototyping and tooling to mass production and aftermarket operations.

Stratasys and Desktop Metal have IP portfolios that total more than 3,400 patents and pending patent applications. Together, the two firms have invested more than $500 million in R&D over the last four fiscal years. Officials said the combined firm will have one of the largest R&D and engineering teams in the industry with over 800 scientists and engineers.

The merged firm will have more than 27,000 industrial customers and is expected to generate approximately $50 million in additional annual run-rate cost synergies by 2025. These savings are expected to come from cost reductions in sales, general and administrative expenses, supply chain management and optimization of operational processes. An additional $50 million in annual run-rate revenue synergies by 2025 is expected to come from enhanced market access.

Zeif will lead the combined company as CEO, with Fulop as chairman of the board. The combined company's board of directors will have 11 members: five selected by Stratasys and five by Desktop Metal, with Stratasys Chairman Dov Ofer as lead independent director.

The merger would end a tumultuous period for Stratasys. The firm rejected several buyout offers from Nano Dimension Ltd. earlier this year. On April 13, Stratasys turned down Nano's offer of $20.05 per share in cash. In a news release, Stratasys officials said that the offer "continues to substantially undervalue Stratasys … and is not in the best interests of Stratasys and its shareholders." The Nano deal valued Stratasys at almost $1.4 billion.

Waltham, Mass.-based Nano already is the largest shareholder in Stratasys, with a stake of 14.5 percent. Both firms are major suppliers of 3D printers, materials and technology.

Desktop Metal posted sales of $209 million in 2022, but reported a loss of $740 million. Officials expected sales for 2023 to be between $210 million and $260 million.

Desktop Metal was founded in 2015 as a metal and carbon fiber 3D printing firm. The company's systems now print metal, polymers, sand and other ceramics, as well as foam and recycled wood. The firm has U.S. engineering facilities in California, Michigan, New Jersey, Ohio, Pennsylvania and Texas, as well as at sites in Germany, Italy, Belgium and Japan.

In full-year 2022, Stratasys had sales of about $650 million but posted a loss of almost $29 million. Earlier this year, Stratasys completed its purchase of Covestro's additive manufacturing business for almost $44 million.

On Wall Street, Stratasys' per-share stock price began the year just under $12 but was just over $15 in early trading May 25 for a gain of about 25 percent. At Desktop Metal, the firm's per-share price began the year at $1.40 but was near $1.80 May 25 for a gain of almost 30 percent.