Desktop Metal and Stratasys to Create a 3D Printing Powerhouse Desktop Metal (DM:NYE), a leading provider of metal and carbon fiber 3D printing systems, announced that it will merge with Stratasys (SSYS:NSD), a pioneer and global leader in polymer 3D printing solutions. The deal, valued at $1.8 billion, will create a combined company with a broad portfolio of products and technologies, a strong global presence, and a robust financial profile.
The merger will bring together two complementary players in the 3D printing industry, with Stratasys’s expertise in polymer 3D printing and Desktop Metal’s leadership in metal and carbon fiber 3D printing. The combined company will offer a comprehensive range of 3D printing solutions for various applications and industries, from prototyping and tooling to mass production and aftermarket parts.
The merger will also create significant synergies and growth opportunities for the combined company, as it leverages its combined R&D capabilities, distribution network, and customer base. The combined company is expected to generate $1.1 billion in revenue by 2025, with an adjusted EBITDA margin of 10% to 12%. The total addressable market for 3D printing is estimated to be more than $100 billion by 2032.
According to the terms of the deal, Desktop Metal shareholders will receive 0.123 ordinary shares of Stratasys for each share of Desktop Metal Class A common stock they own. This implies a value of $1.88 per share of Desktop Metal Class A common stock based on the closing price of Stratasys ordinary share of $15.26 on May 23. The transaction is expected to close in the fourth quarter of 2023, subject to customary closing conditions and regulatory approvals. Upon completion of the merger, existing Stratasys shareholders will own approximately 59% of the combined company, while Desktop Metal shareholders will own approximately 41%.
The merger has been unanimously approved by the boards of directors of both companies and has received the support of major shareholders of both companies, including Baillie Gifford, ARK Investment Management, and Lux Capital. The merger will be structured as a reverse triangular merger, whereby a newly formed subsidiary of Stratasys will merge with and into Desktop Metal, with Desktop Metal surviving as a wholly owned subsidiary of Stratasys.
Desktop Metal Stock Soars on the Merger News:
Desktop Metal stock surged more than 21% in after-hours trading on Wednesday, following the announcement of the merger with Stratasys. The stock continued to rally in pre-market trading on Thursday, as investors reacted positively to the news.
Desktop Metal stock has been on an upward trend since its debut on the New York Stock Exchange in December 2020, following a reverse merger with a special purpose acquisition company (SPAC). The company has been growing its revenue and expanding its product portfolio, while also reducing its operating expenses and improving its adjusted EBITDA.
In the first quarter of 2021, Desktop Metal reported revenue of $11.3 million, up 35% year-over-year and above its guidance range. The company also achieved a positive gross margin for the first time in its history, at 2%, compared to -38% in the same period last year. The company’s adjusted EBITDA loss narrowed to $26.9 million, compared to $29.6 million in the first quarter of 2020.
Desktop Metal’s CEO Ric Fulop said that the company expects to see continued improvement in its financial performance throughout the year, as it benefits from its cost-reduction initiatives and increased demand for its products. The company reaffirmed its full-year revenue guidance of $100 million.
Desktop Metal’s merger with Stratasys will further enhance its growth prospects and competitive position in the 3D printing industry. The combined company will have a diversified product portfolio that covers multiple materials, technologies, and applications. The combined company will also have a global footprint that spans over 100 countries and serves more than 100,000 customers.
The merger will also create significant value for Desktop Metal shareholders, as they will own a stake in a larger and more profitable company that has greater scale and synergies. The merger is expected to be accretive to Stratasys’s non-GAAP earnings per share within two years after closing.
The merger is a win-win situation for both Desktop Metal and Stratasys, as they join forces to create a 3D printing powerhouse that can capitalize on the growing opportunities in the industry.