Nano Dimension suddenly announced a new bid to take over Stratasys, re-igniting the takeover wars we thought were concluded.
The company triggered an intense corporate battle earlier in 2023 when they decided to use their huge cash reserve to buy Stratasys. Currently they hold a reasonable chunk of Stratasys shares, something near 15%. They issued a series of bids in various configurations, all of which intended to take control of Stratasys with at least 50% of the shares.
This in turn triggered 3D Systems into action, which feared the size of a combined “NanoStratasys”. They issued their own series of bids. In the end, Stratasys’ board of directors rejected all of these proposals and then retreated into an analysis phase where they would consider what to do next.
Last week Stratasys issued new shareholder rights designed to prevent hostile takeovers, and force buyers to negotiate directly with their board. The previous temporary rules were set to expire at the end of the year. This was clearly done because they must have expected continued hostile bids, in spite of other players saying they were done.
This was just in time, because Nano Dimension, in spite of prior indications they were “out”, is now “back in” with a new cash bid to buy out Stratasys. My suspicion is that Nano Dimension always intended to buy out Stratasys at almost any cost, and viewed the year-end expiry as the moment to pounce. Unfortunately for them, Stratasys’ new shareholder rights should cause them some challenges in this most recent bid.
The proposal is to buy all non-Nano Dimension owned shares, about 85% of the shares of Stratasys at a price of US$16.50. According to my rough calculations, this represents something close to 60M shares. That would imply the bid’s value is close to US$990M, and that just happens to be close to the size of Nano Dimension’s cash reserve.
Nano Dimension also stated they’ve arranged for independent financing, should that be required. It suggests they anticipate raising their bid during negotiations. Now, I may not be a lawyer, but it seems to me that informing the buyer that you have more cash to spend on a proposed deal is not the best negotiating tactic.
Is this a good value for Stratasys? Let’s do some arithmetic. The bid is actually far, far less than the US$20 and US$24 per share bids from earlier this year. Stratasys could have made a lot more money accepting an earlier bid than this latest offer, yet Stratasys rejected them.
Stratasys’ current valuation is about US$900M, so 85% of that is US$785M. This suggests that the US$16.50 per share bid is about 25% more than current market value.
Later, Stratasys acknowledged receipt of the proposal, but didn’t offer any hints as to what they may decide.
Where will this go? Two thoughts here.
First, Stratasys will almost certainly reject the bid. They had opportunities to make more money earlier, and rejected them. They will do so again.
Secondly, independent Stratasys shareholders must make a decision on this bid; should they sell their shares? I also think they will largely reject this bid. It’s again smaller than previously rejected bids, so the same logic applies.
There is also a fear that the combined company valuation will be less than the sum of the parts, as has been the case with Nano Dimension’s current valuation: the company has a billion dollars in cash reserves, yet is valued at only US$688M this week. That says that investors believe a dollar of cash controlled by Nano Dimension is WORTH LESS THAN A DOLLAR. That fact does not demonstrate much investor confidence in Nano Dimension’s management abilities.
Adding this all up, where do I think this will go? I expect that everyone will reject the offer and Nano Dimension will come up with a slightly bigger offer.
The only twist is whether more cash will be introduced from external sources. Up to now Nano Dimension has stayed within the window of their cash reserve. The big question is, if they gain access to more funds, how does that change the control situation?
Stay tuned, we are now in Season Two of the Stratasys Saga.
Via Nano Dimension
