3D Systems (NYSE:DDD) (the “Company”) today announced that it has
submitted an enhanced proposal to the Board of Directors of
Stratasys Ltd. (NASDAQ: SSYS) (“Stratasys”) to combine the two
companies in a cash and stock transaction that would convert each
Stratasys ordinary share into $7.50 in cash and 1.3223 newly issued
shares of 3D Systems common stock. Under the terms of the revised
offer, the combination would result in Stratasys shareholders
owning approximately 41% of the combined company and receiving
approximately $540 million in cash at the time of consummation of
the transaction.
3D Systems’ June 27 proposal represents meaningful enhancements
to its previous proposal submitted to the Stratasys Board on May
30, 2023, and continues to be underscored by prior discussions
between 3D Systems’ and Stratasys’ management teams, including a
diligence meeting held in September 2022. The Company believes the
June 27 proposal is superior to Stratasys’ announced combination
with Desktop Metal. The key features of 3D Systems’ proposal
include:
- Improved Value
- As of market close on June 26, the proposal represents a value
per Stratasys share of approximately $20 based on 3D Systems’
10-day volume-weighted average price (“VWAP”), representing a
premium of 33% to the Stratasys closing share price on May 24,
2023, the last trading day prior to the announcement of the
transaction with Desktop Metal.
- Inclusive of estimated cost synergies, represents a value of at
least approximately $26 per Stratasys share, or an approximately
71% value uplift, inclusive of cost synergies.1
- 3D Systems would also be open to offering Stratasys
shareholders the opportunity to choose their preferred
consideration mix, subject to customary limits on the aggregate
amount of cash and stock 3D Systems will include in the
transaction.
- Improved Certainty
- Entrance into a definitive merger agreement on terms that
provide Stratasys shareholders with at least as much deal certainty
as the existing all-stock merger agreement with Desktop Metal.
- No CFIUS or ITAR approvals required, unlike the proposed
Stratasys-Desktop Metal transaction, and continued confidence that
all applicable regulatory clearances will be obtained.
President and CEO Dr. Jeffrey Graves stated, “We are resolute in
pursuing a friendly combination of 3D Systems and Stratasys. It is
clear to us that we have presented the Stratasys Board with a
superior proposal to the proposed Desktop Metal transaction. We
believe there is no better opportunity to leverage the combined
strength of our complementary portfolio and create an innovative
additive manufacturing leader with unmatched global scale and we
are encouraged by the overwhelmingly positive response we’ve
received from the market.”
Strategic and Financial Highlights of the 3D Systems and
Stratasys Combination
- Scale Drives Leadership: Delivers immediate
scale for leadership in the rapidly growing and fragmented additive
manufacturing industry.
- Complementary Technology Portfolio:
Combination of proven technologies with limited overlap, creating a
combined portfolio better positioned to service nearly every
vertical in the 3D printing market today.
- Significant Cost Synergies: Highly certain
value creation potential through realization of at least $100
million in cost synergies across SG&A savings, R&D
integration and COGS optimization, jointly identified by members of
both companies’ management teams during due diligence sessions in
September 2022, in addition to significant revenue opportunities
not currently included in 3D Systems’ pro forma valuation
analysis.
- Industry Leading Financial Profile: Estimated
LTM combined revenue of $1.2 billion and ~$150 million in pro forma
cash on the combined company balance sheet with a combined ~12%
EBITDA margin2 and no debt or equity financing contemplated.
- Meaningful Growth Opportunities from Regenerative
Medicine: Unmatched bioprinting leadership potential, with
a clear road map for human applications, including human trials for
3D printed lungs anticipated by 2026.
3D System’s Proposal Promises to Deliver More Value to
Stratasys Shareholders Than the Proposed Desktop Metal
Combination
In its rejection of 3D Systems’ May 30 proposal, Stratasys
turned down a transaction that 3D Systems believes promises
straightforward and highly achievable value creation. The Company
believes Stratasys relies on assumptions that are unfounded and
unreasonable in order to claim its acquisition of Desktop Metal
will create significant value. These assumptions include:
- A Sudden and Significant Shift in Projected Desktop
Metal Performance: Stratasys management’s EBITDA
projections for Desktop Metal unrealistically assume sudden and
meteoric growth and the realization of speculative revenue
synergies by Desktop Metal, a company that has not delivered on its
growth prospects or any of its financial commitments since its
de-SPAC “IPO” in 2020.
- Turnaround of a 28-year-old Metals Technology:
Stratasys continues to tout Desktop Metal’s binder jet technology
as the future of mass-produced additively manufactured metal
products, but after nearly three decades, all players focused on
binder jet metals have only amassed a 4% share of the total market,
largely due to inferior technology. Binder jet technology continues
to face significant challenges to demonstrate its viability,
achieve scale for mass production and generate a profit.
- Unrealistic Cost Synergy Assumptions:
Stratasys has stated the Desktop Metal transaction will result in
$50 million of cost synergies. The Company does not believe that is
achievable. This $50 million is incremental to the $100 million of
standalone cost reductions previously announced by Desktop Metal,
which equates to 60% of Desktop Metal’s 2022 operating expenses
based on 3D Systems’ analysis.
- Highly Speculative Revenue Synergies:
Stratasys also cites significant value creation potential through
the realization of speculative revenue synergies from manufacturing
and mass production. The Company believes investors should be
skeptical of such revenue synergies as they are hard to establish
and forecast until actually achieved.
- Highly Speculative and Unsupported Multiple
Re-rating: In rejecting the 3D Systems proposal, Stratasys
published a valuation analysis that predicated 65% of the potential
uplift from the Desktop Metal merger on a multiple re-rating that
3D Systems believes is highly speculative and unsupported.
- An Inferior Financial Profile: The Company’s
analysis shows that the combination with Desktop Metal will create
a combined company with lower pro forma revenue, lower gross
profit, negative EBITDA margin and negative free cash flow. 3D
Systems believes Desktop Metal’s historical track record of
operating losses, impairments and cash burn will introduce
significant risk to Stratasys’ financial profile in the coming
years.
Dr. Graves concluded, “As we have shown through our enhanced
proposal, we remain ready and willing to deliver our collective
shareholders the tremendous value creation potential offered by a
combination of our two companies. We strongly urge the Stratasys
Board to engage with us constructively on a friendly agreement for
the benefit of our collective shareholders, employees and
customers.”
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 in connection with the proposed transaction.
For accompanying slides, please visit the Company’s website.
Conference Call and Webcast Information
3D Systems will host a conference call and simultaneous webcast
to discuss this announcement, which can be accessed as follows:
Date: Tuesday, June 27, 2023
Time: 8 a.m. Eastern Time
Listen via webcast: www.3dsystems.com/investor
Participate via telephone: 201-689-8762
A replay of the webcast will be available approximately two
hours after the live presentation at
www.3dsystems.com/investor.
About 3D SystemsMore than 35 years ago, 3D
Systems brought the innovation of 3D printing to the manufacturing
industry. Today, as the leading additive manufacturing solutions
partner, we bring innovation, performance, and reliability to every
interaction – empowering our customers to create products and
business models never before possible. Thanks to our unique
offering of hardware, software, materials, and services, each
application-specific solution is powered by the expertise of our
application engineers who collaborate with customers to transform
how they deliver their products and services. 3D Systems’ solutions
address a variety of advanced applications in healthcare and
industrial markets such as medical and dental, aerospace &
defense, automotive, and durable goods. More information on the
company is available at www.3DSystems.com.
Forward-Looking StatementsCertain statements
made in this document that are not statements of historical or
current facts are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results,
performance or achievements of the company to be materially
different from historical results or from any future results or
projections expressed or implied by such forward-looking
statements. In many cases, forward-looking statements can be
identified by terms such as “believes,” “belief,” “expects,” “may,”
“will,” “estimates,” “intends,” “anticipates” or “plans” or the
negative of these terms or other comparable terminology.
Forward-looking statements are based upon management’s beliefs,
assumptions and current expectations and may include comments as to
the company’s beliefs and expectations as to future events and
trends affecting its business and are necessarily subject to
uncertainties, many of which are outside the control of the
company. The factors described under the headings “Forward-Looking
Statements” and “Risk Factors” in the company’s periodic filings
with the Securities and Exchange Commission, as well as other
factors, could cause actual results to differ materially from those
reflected or predicted in forward-looking statements. In
particular, we note that there is no assurance that a definitive
agreement for the transaction referenced in this document will be
entered into or consummated or that integration will be successful
or synergies will be realized if such transaction were to be
consummated. Business combination proposals, transactions and
integrations are subject to numerous risks and uncertainties.
Although management believes that the expectations reflected in the
forward-looking statements are reasonable, forward-looking
statements are not, and should not be relied upon as a guarantee of
future performance or results, nor will they necessarily prove to
be accurate indications of the times at which such performance or
results will be achieved. The forward-looking statements included
are made only as of the date of the statement. 3D Systems
undertakes no obligation to update or revise any forward-looking
statements made by management or on its behalf, whether as a result
of future developments, subsequent events or circumstances, or
otherwise, except as required by law.
Additional InformationThis communication does
not constitute an offer to buy or sell or the solicitation of an
offer to sell or buy any securities. This communication relates to
a proposal which 3D Systems has made for a business
combination with Stratasys. In furtherance of this proposal and
subject to future developments, 3D Systems (and, if a negotiated
transaction is agreed, Stratasys) may file one or more
registration statements, proxy statements or other documents with
the SEC. This communication is not a substitute for any proxy
statement, registration statement, prospectus or other
document that 3D Systems and/or Stratasys may
file with the SEC in connection with the proposed
transaction.
Investors and security holders of 3D
Systems and Stratasys are urged to read the proxy
statement(s), registration statement, prospectus and/or other
documents filed with the SEC carefully in their entirety
if and when they become available as they will contain important
information about the proposed transaction. Any definitive proxy
statement(s) or prospectus(es) (if and when available) will be
mailed to stockholders of 3D Systems and/or Stratasys, as
applicable. Investors and security holders will be able to obtain
free copies of these documents (if and when available) and other
documents filed with the SEC by 3D Systems through the
web site maintained by the SEC at http://www.sec.gov.
This document shall not constitute an offer to buy or sell or
the solicitation of an offer to sell or buy any securities, nor
shall there be any sale of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by
means of a prospectus meeting the requirements of Section 10
of the U.S. Securities Act of 1933, as amended.
This communication is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC. Nonetheless, 3D Systems and its
directors and executive officers and other members of management
and employees may be deemed to be participants in the solicitation
of proxies in respect of the proposed transaction. You can find
information about 3D Systems’ executive officers and
directors in 3D Systems’ definitive proxy statement filed with
the SEC on April 5, 2023. Additional information
regarding the interests of such potential participants will be
included in one or more registration statements, proxy statements
or other documents filed with the SEC if and when they
become available. These documents (if and when available) may be
obtained free of charge from the SEC’s website at
http://www.sec.gov.
ContactsInvestors:3D
Systemsinvestor.relations@3dsystems.com
MacKenzie Partners, Inc.Dan Burch / Bob
Maresedburch@mackenziepartners.com /
bmarese@mackenziepartners.com
U.S. Media:FTI ConsultingPat Tucker / Rachel Chesley / Kyla
MacLennan3DSystems@fticonsulting.com
Israel Media:Gelbart-Kahana Investor RelationsAviram
Uziaviram@gk-biz.com+972-525329103
———————————————1 Assumes $1,500mm in incremental equity value
from $100mm of cost synergies capitalized at an illustrative 15x
multiple, approximately 41% combined company ownership to Stratasys
shareholders, a total cash payment by 3D Systems to Stratasys
shareholders of approximately $540mm, and additional illustrative
transaction cost assumptions, including payment of the termination
fee to Desktop Metal.2 Based on CY2023E EBITDA guidance and $100mm
run-rate cost synergies.
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