In a transfer to reshape the way forward for additive manufacturing, 3D Programs (NYSE:DDD) has formally proposed a merger with its trade peer Stratasys (Nasdaq:SSYS). Stratasys had beforehand introduced receipt of the 3D Programs provide, however particulars remained mild.

The proposed merger, introduced by 3D Programs on June 2, 2023, will mix money and inventory, with Stratasys shareholders receiving $7.50 per share in money and 1.2507 shares of newly issued 3D Programs frequent inventory for every Stratasys share. That is based mostly upon 135.3M and 72.1M totally diluted shares excellent for 3D Programs and Stratasys, respectively.

This union will merge two frontrunners within the 3D printing house, successfully creating a world chief in additive manufacturing. As soon as finalized, Stratasys shareholders can have a 40% stake within the newly fashioned entity and be entitled to roughly $540 million in money.

3D Programs made this merger proposal to the Stratasys board on Might 30, 2023. The proposed amalgamation comes at a major premium to Stratasys shareholders. The deal, inclusive of estimated price synergies of roughly $100 million, would current Stratasys shareholders with a price in extra of $1,840 million, considerably greater than Stratasys’ totally diluted market capitalization. 

You will need to word that 3D Programs has used a number of assumptions to organize this illustration. Particularly, the calculation “assumes $1,500mm in incremental fairness worth from $100mm of price synergies capitalized at an illustrative 15x a number of, roughly 40% mixed firm possession to Stratasys shareholders, a complete money cost by 3D Programs to Stratasys shareholders of roughly $540mm and extra illustrative transaction price assumptions, together with cost of the termination payment to Desktop Metallic.”

Dr. Jeffrey Graves, President and CEO of 3D Programs, expressed his confidence within the proposed merger. “The confluence of 3D Programs and Stratasys brings about a superb end result for shareholders of each firms. Our two entities becoming a member of forces is just logical. We’re uniquely poised to behave rapidly and with conviction. We urge the Stratasys Board of Administrators to entertain our proposal, making this consolidation a actuality for the good thing about shareholders, staff, and clients of each firms,” mentioned Graves.

Calculating the worth of 3D Programs provide to purchase Stratasys

From the offered data, the proposed merger worth might be calculated in two elements: money per share and newly issued shares of 3D Programs.

Concerning money, it’s proposed Stratasys shareholders will obtain $7.50 in money per share. On condition that Stratasys has 72.1 million shares excellent, the full money part of the deal is 72.1M * $7.50 = $541.5 million.

By way of inventory, Stratasys shareholders would obtain 1.2507 shares of 3D Programs for every share of Stratasys. On the present 3D Programs share worth of $8.78, every Stratasys share is valued at 1.2507 * $8.78 = $10.97.

Subsequently, the full worth per share supplied to Stratasys shareholders is the sum of the money and inventory elements, or $7.50 + $10.97 = $18.47 per share.

On condition that there are 72.1 million shares of Stratasys excellent, the full provide worth from 3D Programs is $18.47 * 72.1M = roughly $1,332.3 million. This worth doesn’t embrace the anticipated synergies from the merger, that are anticipated so as to add about $100 million in incremental fairness worth.

Nonetheless, the proposed merger was quoted to supply a complete worth in extra of $1,840 million to Stratasys shareholders, which suggests the anticipated synergies and different deal features account for the distinction between the calculated provide worth and the quoted complete worth.

Key highlights of the proposed Stratasys and 3D Programs merger 

3D Programs has highlighted advantages relating to market place, worth creation, monetary outcomes, deal pace, and certainty. 

A number one place in additive manufacturing whereby the mixed entity would have the dimensions crucial to steer the trade and a powerful vary of additive applied sciences. The broadened scope of innovation may generate new income streams. The newly fashioned firm can be anticipated to supply unmatched worth proposition to clients, enhancing market entry and protection. The trade, which is projected to develop at a CAGR of roughly 21% over the subsequent 5 to 7 years, will profit from a wider vary of production-ready additive applied sciences.

By way of worth creation, shareholders of Stratasys stand to achieve from the merger by realizing roughly $100 million in estimated price synergies. The proposed deal, together with synergies, is value about $1.8 billion and a 70% worth uplift for Stratasys shareholders.

Concerning the mixed monetary profile, the brand new entity can have a strong monetary standing. 3D Programs’ projections present revenues of $1.3 billion for the mixed 3D Programs-Stratasys by 2024, making it the largest pure-play additive manufacturing agency. The anticipated free money movement for 2024 is $121 million, together with synergies.

Transactional pace and certainty are the ultimate classes. 3D Programs says the deal guarantees fast entry right into a definitive merger settlement, offering Stratasys shareholders with the identical deal certainty as the prevailing all-stock merger settlement with Desktop Metallic. The proposal contains instant money and liquid inventory worth with none financing situation or delay.

On the regulatory entrance, 3D Programs believes that the mandatory approvals for the merger might be obtained in a well timed method.

“We’re at a turning level in our trade, and we anticipate important benefits for our shareholders and all stakeholders by seizing the advantages of scale, enhancing funding in innovation and delivering long-term worthwhile development,” added Dr. Graves.

Goldman Sachs & Co. LLC has been enlisted because the unique monetary advisor to 3D Programs on this transaction, with authorized counsel offered by Freshfields Bruckhaus Deringer (US) LLP, along with Herzog, Fox & Neeman in Israel.

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Featured picture exhibits 3D Programs Determine 4 prints. Picture by Michael Petch