Although long-time 3D printing opponents Stratasys (Nasdaq: SSYS) and 3D Programs (NYSE: DDD) are nonetheless in negotiations, the previous firm has expressed its continued intent to merge with the smaller additive manufacturing newcomer Desktop Metallic (NYSE: DM). Stratasys introduced that shareholders will vote for or in opposition to the deal at an Extraordinary Normal Assembly (EGM) of Shareholders on September 28, 2023, with each the Stratasys and Desktop Board of Administrators urging traders to vote for the merger. Proxy voters have till Thursday, August 24 to register their choices.

A Desktop Merger

Desktop Metallic’s Class A standard inventory might be exchanged for odd shares of Stratasys at a set ratio, leading to Desktop Metallic stockholders holding roughly 41% of the mixed firm, whereas Stratasys shareholders will maintain about 59%. The deal’s implied worth is dependent upon market worth of Stratasys odd shares, which was about $1.83 per share of Desktop Metallic inventory as of the final buying and selling day earlier than the announcement.

Each Stratasys and Desktop Metallic will maintain conferences for shareholders to vote on numerous proposals, together with the Merger itself, adjustments to Stratasys’ articles of affiliation, growing the licensed share capital, electing new administrators, and different associated issues. Approval of the merger settlement by each events is required for the merger to be accomplished.

The proxy vote that happens a month earlier than the EGM has the potential to affect any negotiations with 3D Programs. If the proxy voters are overwhelmingly in favor of a Desktop merger, then Stratasys might probably use that to extend leverage in its discussions. On the identical time, such a vote may counsel to the Board that the shareholders favor a Desktop merger over a mixture with 3D Programs.

DOJ Antitrust Investigation

For the deal to undergo, not solely will shareholders must vote in favor of it, however the two corporations should make it via a probe being carried out by the U.S. Division of Justice (DOJ) to see if the merger represents a potential violation of antitrust legal guidelines, particularly the Hart–Scott–Rodino Antitrust Enhancements Act of 1976. Each corporations acquired a “second request” from the DOJ’s Antitrust Division, indicating that the DOJ must carry out a extra detailed evaluation of the merger, probably delaying the deal.

The HSR Act oversees the merging or shopping for of huge companies. When two corporations above particular monetary thresholds need to merge or one needs to accumulate the opposite, they have to notify the Federal Commerce Fee (FTC) and the DOJ earlier than continuing. As soon as the businesses notify the federal government, there’s a normal ready interval of 30 days, permitting the authorities to verify if the deal may cut back competitors. If there are issues, the federal government can request extra info (a “second request”), extending the ready interval, and even sue to dam the deal in the event that they decide it might hurt competitors.

A preliminary investigation is par for the course in 3D printing, however a second request is much less widespread. It’s the DOJ’s responsibility to research all mergers of a specific measurement and it has accomplished so prior to now in AM. As an example, within the case of Stratasys’s merger with Objet in 2012, the DOJ terminated its investigation early after it was argued that the 2 corporations’ merchandise “had been extra prone to be enhances than substitutes, and subsequently the merger mustn’t elevate aggressive issues.”

The DOJ might have some points with the present case as a result of the truth that there’s some overlap between Stratasys and Desktop Metallic’s vat photopolymerization strains. In any other case, there wouldn’t appear to be a lot of drawback in that regard. Given the truth that Desktop Metallic is notably smaller than 3D Programs, with whom Stratasys can be in talks a couple of potential merger, one can solely think about the crimson tape that may be related to a mixture in that case. In spite of everything, each corporations supply polymer powder mattress fusion (PBF), vat photopolymerization, fused deposition modeling, and inkjet merchandise. Furthermore, they’re the 2 largest pure-play corporations within the trade.

In 2001, the DOJ decided that the proposed merger of 3D Programs with PBF pioneer DTM “would have considerably lessened competitors within the U.S. industrial fast prototyping techniques market by lowering the variety of opponents within the U.S. market from three to 2 and limiting the dynamic competitors that has resulted in decrease costs to prospects and technological enhancements to fast prototyping techniques.” It went as far as to sue to dam the transaction earlier than permitting the deal to undergo “supplied that the merged 3D/DTM agreed to license their fast prototyping patents to an organization that at the moment manufactures fast prototyping tools outdoors of the U.S. and that may now compete within the U.S. market, thus including a brand new entrant.”

In a manner, the present investigation into Stratasys and Desktop serves as a check for what might occur with a bigger mixture between Stratasys and 3D Programs. Relying on the end result, the events will know what kind of setting they face in relation to a extra substantial merger.

All of this complicates an already complicated deal, which noticed Israeli electronics 3D printer producer Nano Dimension (Nasdaq: NNDM) combat to purchase Stratasys. Since then, Nano Dimension has backed off and is as an alternative pursuing a brand new technique, together with smaller purchases. How the trade shakes out is dependent upon what occurs with Stratasys, Desktop, and 3D Programs. We will definitely anticipate additional mergers and acquisitions, about that are theorized in a separate article.