Stratasys (SSYS) Soars 9% as Takeover Bidding War Intensifies
Stratasys Limited SSYS shares gained 9% on Thursday after receiving a revised acquisition offer from 3D Systems DDD, depicting a further intensifying bidding war to take over the 3D hardware and software solution provider.
On Jul 13, 3D Systems enhanced its bidding offer to acquire Stratasys for the second time. Under the revised cash-stock bidding proposal, 3D Systems is offering $7.50 in cash and 1.5444 shares of the combined company for each share of Stratasys.
The revised offer price is higher than 3D Systems’ May 30, 2023 initial offer of $7.50 in cash and 1.2507 shares. This is also way above the first revised proposal offered on Jun 27 of $7.50 in cash and 1.3223 newly issued shares of the combined company. The new bidding price increases the ownership of SSYS shareholders in the combined company to 44% from the initial offering of 40% and the first revised proposal of 41%.
Bidding War Accentuates for Stratasys
3D Systems’ enhanced offering to acquire Stratasys came days after Nano Dimension NNDM raised the price of its special tender offer from $20.05 to $24 per share in cash on Jul 10. 3D Systems latest offer values Stratasys shares at $24.07 based on the Jul 12 closing price, slightly higher than Nano Dimension’s new offer price.
The intensified takeover bidding war has led Stratasys’ share price higher year to date (YTD). SSYS stock has surged 76.3% YTD, outperforming the Zacks Computer Peripheral Equipment industry’s growth of a mere 3.6%.
Stratasys, Ltd. Price and Consensus
Stratasys, Ltd. price-consensus-chart | Stratasys, Ltd. Quote
While Nano Dimensions has been trying to acquire Stratasys since late March 2023 and revised its offerings multiple times, 3D Systems entered into the bidding race in late May. However, Stratasys has so far rejected the offers of both bidders except for the last revised proposals.
Meanwhile, on May 25, Stratasys announced that it has entered into a definitive agreement with Desktop Metal DM to combine the two companies in an all-stock transaction valued at approximately $1.8 billion. Following the merger, which is expected to be completed in the fourth quarter of 2023, Stratasys shareholders are anticipated to have a 59% stake in the combined company, while Desktop Metal shareholders will own the remaining 41%.
However, 3D Systems believes that its proposal is more favorable for Stratasys shareholders than the announced business combination with Desktop Metal. Talking about its revised bidding proposal, 3D Systems pointed out several benefits for shareholders as well as the combined company.
If management accepts 3D Systems’ proposal, apart from receiving instant cash benefits, Stratasys shareholders will get the share consideration on a tax-free basis. Furthermore, 3D Systems intends to fund the cash consideration from the pro forma balance sheet of the combined company, and hence, it will not be subject to any debt or equity financing condition.
3D Systems claims that the acquisition of Stratasys will create cost synergies of at least $100 million through research and development integration, selling, general and administrative savings and the cost of goods sold optimization. The combined company is anticipated to generate revenues of $1.2 billion and an EBITDA margin of approximately 12%.
What Makes Stratasys a Lucrative Takeover Target?
We believe that Stratasys’ strong long-term growth prospects make it a lucrative takeover target. SSYS has been scaling newer heights across all its business segments.
This Zacks Rank #3 (Hold) company has been benefiting from an increase in the demand for 3D-printed materials and its focus on product launches, strategic partnership agreements and acquisitions. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The company has inked strategic partnerships with the likes of Schneider Electric, The Boeing Co., Ford Motor Co., Siemens, Boom Supersonic and United Launch Alliance to fuel its growth momentum. Such collaborations help introduce advanced 3D printing technologies to the aerospace and automotive industries while expanding Stratasys’ geographic reach and driving its market penetration.
Also, Stratasys launched several innovative products, which position it well in the long term. Stratasys’ machines facilitate prototyping within a few hours, which reduces development time and upfront costs.
In May, the company reported better-than-expected results for the first quarter of 2023. Its first-quarter revenues of $149.4 million surpassed the Zacks Consensus Estimate of $142.2 million. Moreover, Stratasys reported non-GAAP earnings of 2 cents per share, while the consensus mark was pegged at a loss of 8 cents.
The 3D printing market presents a favorable long-term investment opportunity as a large number of engineers, designers, architects and entrepreneurs are resorting to 3D solutions for their primary designing and product modeling.
Per the MarketsandMarkets report, the global 3D printing market is expected to reach $34.5 billion by 2028 from $15 billion in 2023, representing a CAGR of 18.1% through the forecast period. Being one of the industry leaders in the 3D printing space, along with its sustained focus on developing innovative products, Stratasys is likely to grab a large share of this market.
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Stratasys, Ltd. (SSYS) : Free Stock Analysis Report
3D Systems Corporation (DDD) : Free Stock Analysis Report
Desktop Metal, Inc. (DM) : Free Stock Analysis Report
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