3D Systems announces enhanced, binding offer to combine with Stratasys

3D Systems (DDD) announced an enhanced, binding offer to combine with Stratasys (SSYS). Each Stratasys share will convert into $7.50 in cash and 1.5444 shares of the combined company, representing ownership by the Stratasys shareholders, in the aggregate, of approximately 44% of the shares of the combined company, in addition to the approximately $540 million of aggregate cash consideration being offered. The binding offer by 3D Systems represents compelling value for Stratasys shareholders by any measure: Implied value per Stratasys share of $24.07, based on 3D Systems July 12, 2023 closing share price, representing a 62% premium to the closing price per Stratasys share on May 24, 2023, the last trading day prior to the announcement of the proposed transaction by Stratasys with Desktop Metal. Implied value of approximately $28 per Stratasys share, or an approximately 80% premium, inclusive of $100 million of mutually identified and agreed upon cost synergies. Represents a ~15% improvement to 3D Systems’ proposal submitted to the Stratasys Board on May 30, 2023. Concurrently with the announcement of this binding offer, 3D Systems has delivered to Stratasys a signed merger agreement in escrow. This merger agreement, which lays out the details of the merger and, as required, will be filed on Form 8-K with the SEC by 3D Systems, now awaits countersignature by Stratasys. The terms outlined in 3D Systems’ merger agreement, including the representations, warranties, covenants, closing conditions and termination rights, were designed to track those in the Desktop Metal merger agreement in order to offer Stratasys and its shareholders at least as much certainty as the Desktop Metal transaction. These terms include: 3D Systems Picks Up the Desktop Metal Termination Fees: 3D Systems will pay, on behalf of Stratasys, the full amount of any termination fees owing to Desktop Metal, as a result of the failure to obtain Stratasys’ shareholder approval of such agreement and as a result of the entrance by Stratasys into the merger agreement with 3D Systems. No Financing Condition: 3D Systems will fund the cash consideration from the pro forma balance sheet of the combined company and, as such, the proposed merger is not subject to any debt or equity financing condition. Right to Elect Form of Consideration: Each Stratasys shareholder will have the right to elect to receive its preferred mix of cash and stock consideration, subject to the shareholder-friendly election, cap and proration mechanisms. Advantageous tax and capital markets structure: Stratasys shareholders will receive shares of a Delaware-incorporated, domestic SEC registrant. This transition away from holding shares of a foreign private issuer will result in their holding shares in an issuer with access to a significantly broader capital markets base. Moreover, while Stratasys shareholders will need to consult with their own tax advisors, this structure will generally enable Stratasys shareholders to receive the share consideration on a tax-free basis. Regulatory Clearance Certainty with No CFIUS Risks: 3D Systems is confident that all applicable regulatory clearances will be obtained and therefore makes a strong commitment to obtain requisite regulatory clearances. In addition, in contrast to the proposed Desktop Metal merger, no CFIUS approval is required for the proposed combination of Stratasys and 3D Systems. Removal of Unusual Desktop Metal Terms: The Desktop Metal merger agreement contains unusual terms, including a requirement for a number of existing contracts of Desktop Metal to be modified or terminated in advance of closing, a provision for the payment of a termination fee of $19 million by Stratasys to Desktop Metal if these contracts are not modified or terminated, and a provision that the Desktop Metal merger agreement may be terminated if a shareholder were to hold more than 50% of either company. The merger agreement with 3D Systems has no such contingencies hanging over the pathway of the shareholders of both companies to realize superior value upon consummation. Right of Stratasys to Terminate to Accept a Superior Proposal: In contrast to the Desktop Metal merger agreement, Stratasys will have the right to terminate this merger agreement to enter into a superior proposal, ensuring that the shareholders of Stratasys are able to receive, at the end of the day, the best value attainable for their shares.