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First published:3:57AM EST
Shares of 3D printing system provider Desktop Metal (NYSE:DM) jumped in pre-market trading at the time of publishing on Thursday after it was confirmed that Stratasys (NASDAQ:SSYS), a manufacturer of 3D printers and software, will acquire DM in an all-stock deal valued at $1.8 billion.
The combined company is expected to generate $1.1 billion in terms of revenues by 2025, “with significant upside potential in a total addressable market of more than $100 billion by 2032,” while the adjusted EBITDA margin is likely to be between 10% and 12% in 2025.
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. This indicates a value of around $1.88 per share of Desktop Metal Class A common stock based on the closing price of a Stratasys ordinary share of $15.26 on May 23.
The acquisition is expected to close later this year and existing Stratasys shareholders will own around 59% of the combined company while DM stockholders will own the remaining 41% of the combined company.
DM is increasingly focusing on becoming profitable.
During the Q1 conference call, DM’s CEO, Ric Fulop, said that the company had taken additional cost reduction measures, which will significantly improve fixed cost absorption in the coming quarters and boost margins.
The company managed to reduce its adjusted EBITDA losses in Q1 with its cost-reduction initiatives. Further, the company’s management remains upbeat and expects to see a continued positive trend in adjusted EBITDA.
Overall, the improvement in sales and a significant reduction in expenses could lead to sequential improvements in adjusted EBITDA as the year progresses.
Desktop Metal is Up YTD
While the company is taking initiatives to reach profitability, recessionary pressure on its top line keeps analysts sidelined.
Desktop Metal stock has gained nearly 29% year-to-date as the company focuses on turning profitable.
