Stratasys, Desktop Metal to Merge in New Deal

Stratasys Ltd. and Desktop Metal, Inc. have entered into a definitive agreement whereby the companies will combine in an all-stock transaction valued at approximately $1.8 billion. Accordingly, the transaction unites the polymer strengths of Stratasys with the complementary industrial mass production leadership of Desktop Metal’s brands. Thus, creating an additive manufacturing company well-positioned to serve the evolving needs of customers in manufacturing.

Stratasys and Desktop Metal are likely to generate $1.1 billion in 2025 revenue, with significant upside potential in a total addressable market of more than $100 billion by 2032.

Premier Additive Manufacturing Solutions Provider

In the deal, Desktop Metal stockholders will receive 0.123 ordinary shares of Stratasys for each share of Desktop Metal Class A common stock. This represents a value of approximately $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, 2023. Following the closing of the transaction, existing Stratasys shareholders will own approximately 59% of the combined company, and legacy Desktop Metal stockholders will own approximately 41% of the combined company, in each case, on a fully diluted basis.

Dr. Yoav Zeif, CEO of Stratasys, said, “The combination with Desktop Metal will accelerate our growth trajectory by uniting two leaders to create a premier global provider of industrial additive manufacturing solutions.”

In addition, Zeif said, “…the combined company will be committed to delivering ongoing innovation while providing outstanding service to customers. We look forward to building on the complementary strengths of the combined business and leveraging the strong brand equity across the portfolio to deliver enhanced value to shareholders, customers and employees.”

Meanwhile, Ric Fulop, Co-founder, Chairman and CEO of Desktop Metal, said, “We believe this is a landmark moment for the additive manufacturing industry.” “The combination of these two great companies marks a turning point in driving the next phase of additive manufacturing for mass production.”

Compelling Strategic, Financial Benefits

Combined Company Creates Greater Opportunities for Growth:

The transaction establishes a uniquely scaled additive manufacturing company will become one of the largest companies in the industry. Most importantly, targeting $1.1 billion in 2025 revenue. In addition, there are significant opportunities as additive manufacturing increases its offerings in mass production, with expected industry growth to more than $100 billion by 2032.

Brings Together Complementary Portfolios:

Bringing together Stratasys’ and Desktop Metal’s additive manufacturing platform offerings, the combined company will have a broad product portfolio and attractive positions across multiple additive manufacturing technologies and solutions. Upon close, more than 50% of pro forma combined company revenue is expected to be derived from end-use-parts manufacturing and mass production, one of the fastest growing segments in additive manufacturing. The combined company is expected to offer customers end to end solutions from designing, prototyping and tooling to mass production and aftermarket operations across the entire manufacturing lifecycle.

Unites Robust Innovation and Technology Expertise:

The transaction brings together complementary IP portfolios with more than 3,400 patents and pending patent applications. Together, Stratasys and Desktop Metal have invested over $500 million in R&D over the last four fiscal years.

In addition, the combined company will have one of the largest R&D and engineering teams in the industry with over 800 scientists and engineers focused on driving innovation across a differentiated materials library.

Diversifies Customer Base Across Industries and Applications:

This combination brings together complementary products and technologies that cover a wide range of industry verticals and use cases. Moreover, the combined company will have superior global go-to-market capabilities with enhanced market access for recognizable brands, backed up by premier customer support capabilities. With more than 27,000 industrial customers, the combined company will have a large customer base across industries, materials, and applications to drive significant recurring revenue from consumables.

Creates Opportunities for Meaningful Synergies:

The combined company will generate approximately $50 million in additional annual run-rate cost synergies by 2025. Primarily, due to cost reductions in sales, general and administrative expenses, supply chain management and optimization of operational processes.

The combined company is likely to generate an additional $50 million in annual run-rate revenue synergies by 2025 from enhanced market access.1

Increases Financial Strength:

The combined company is targeting 10%-12% adjusted EBITDA margins in 2025. Together, Stratasys and Desktop Metal had $437 million2 of cash and cash equivalents as of the first quarter of 2023, and this transaction accelerates the combined company’s financial flexibility through a well-capitalized balance sheet to drive future growth.

Leadership and Governance

Following the close of the transaction, Dr. Zeif will lead the combined company as Chief Executive Officer together with Mr. Fulop as Chairman of the Board. Upon completion of the transaction, the combined company’s Board of Directors will be comprised of 11 members, five of whom will be selected by Stratasys, and five of whom will be selected by Desktop Metal, plus Dr. Zeif as CEO. Stratasys Chairman Dov Ofer will serve as lead independent director of the combined company.