3D Systems (NYSE:DDD) (the “Company”) issued the following public
letter to shareholders of Stratasys Ltd. (NASDAQ: SSYS)
(“Stratasys”) after leading independent proxy advisor,
Institutional Shareholder Services (“ISS”), recommended that
Stratasys shareholders vote AGAINST Stratasys’ planned acquisition
of Desktop Metal (NYSE: DM) ahead of its September 28, 2023
Extraordinary General Meeting of Shareholders (“EGM”) to vote on
the Desktop Metal transaction.
ISS discussed its recommendation in a detailed, 9-page analysis
that concluded:
[I]t is not clear that [the Desktop
Metal merger] creates value for SSYS shareholders. DDD’s
alternative offer to acquire [Stratasys], by contrast, presents a
more convincing route to value creation for SSYS shareholders.1
The full text of 3D Systems’ letter is as follows:
Stratasys Shareholders,
You have a critical decision to make
on September 28th about the future of Stratasys:
1. Vote FOR the planned all-stock
merger with Desktop Metal, a transaction that would massively
dilute Stratasys shareholders only to rescue an amalgamation of
deteriorating additive manufacturing (“AM”) businesses rapidly
cobbled together in 2021.
- Or -
2. Vote AGAINST the Desktop Metal
transaction to send a clear message to the Stratasys Board of
Directors to accept the superior cash and stock offer from 3D
Systems. The transaction with 3D Systems would provide Stratasys
shareholders with approximately $509 million of upfront cash
consideration and ownership of 46% of the combined company,
featuring a scaled platform with industry-leading revenues, highly
attractive gross margins, positive EBITDA and attractive upside
exposure to its high-growth regenerative medicine platform.
In a report to Stratasys shareholders
published on September 20, 2023, leading proxy advisory firm ISS
recommended that Stratasys shareholders vote AGAINST the proposed
merger with Desktop Metal. In its report, ISS presented the two key
questions shareholders must ask when making their choice: “Which
player is best suited to drive consolidation in the struggling 3D
printing industry, and which combination offers the most favorable
terms for SSYS shareholders.”
ISS’ analysis found that 3D Systems’
binding offer presents Stratasys with a clear path to scale and the
most favorable terms possible to create significant value for
Stratasys shareholders when compared to the proposed transaction
with Desktop Metal. 3D Systems supports this determination by ISS,
as it emphasizes many of the points that 3D Systems has
consistently raised to the market in relation to maintaining and
increasing value for shareholders of the proposed combined company.
3D Systems encourages Stratasys shareholders to consider the facts
when making this critical decision about the future of
Stratasys.
ISS Report Brings Important
Issues to Light
The ISS report highlighted several
key issues for shareholders to consider:
Issue 1: 3D Systems’ Offer
for Stratasys Creates Clear Value for Stratasys Shareholders, While
a Transaction with Desktop Metal Does Not
“While the proposed [DM] transaction
does not appear to be value-destructive, it is not clear that it
creates value for SSYS shareholders. DDD's alternative offer to
acquire the company, by contrast, presents a more convincing route
to value creation for SSYS shareholders. Market reaction to the
proposed transaction was negative; reaction to all public DDD
offers has been positive, at least prior to rejection by SSYS.”
Issue 2: Stratasys’
Engagement with 3D Systems Was Highly Unusual
"Shareholders can reasonably question
the unusual turn of events following SSYS' determination that DDD's
proposal may result in a ‘superior proposal.’…It is reasonable for
shareholders to expect that a determination that the DDD proposal
constituted a superior offer could soon follow the SSYS board's
statement that such an outcome could reasonably be expected. It is
unusual for a "superior proposal" determination not to follow an
earlier statement that a superior proposal would reasonably be
expected.”
Issue 3: Stratasys’ Current
Management Seems More Interested in Self Preservation Than
Delivering Shareholder Value
“Criticism of DDD management and
concern about post-management roles for SSYS management, while
possibly justified to some extent, may suggest that unsatisfactory
post-transaction roles for its management could have been a reason
that SSYS did not ultimately deem DDD's proposal a superior
proposal. In any case, shareholders should expect that transaction
negotiations should first focus on a joint plan to create
shareholder value through a transaction, and only after such plan
had been agreed upon by the parties, to begin discussions about
which individuals are best suited to execute such a plan.”
Altogether, ISS’ report is a
meaningful rebuke of Stratasys’ management and Board’s ability to
act in the best interest of its shareholders.
3D Systems’ Cash and Stock
Offer is Superior to the Proposed All-Stock Desktop Metal Merger in
Every Way, and the Market Agrees
Stratasys has definitively stated it
believes a combination with Desktop Metal is the best path forward
for Stratasys to lead mass production in the additive manufacturing
industry. Yet, Stratasys refuses to compare its combination with
Desktop Metal on a side-by-side basis to 3D Systems’ binding offer,
as ISS did in its report.
It is clear that Stratasys does NOT
want shareholders to view these two transactions as comparable,
however, ISS recognizes that the two transactions should be
compared head-to-head. Since the strategic rationale for each
merger is essentially identical, the relative benefits to Stratasys
shareholders from each deal should be all that matters.
The facts plainly show that if the
Board of Stratasys truly believes in its stated strategic rationale
for pursuing a transaction, then the ONLY choice that benefits
shareholders is a combination with 3D Systems. It defies logic to
call on shareholders to support the rationale of a Desktop Metal
transaction while at the same time rejecting a 3D Systems
offer.
The market sees eye-to-eye with 3D
Systems on the strategic advantages of its proposal to combine with
Stratasys, as ISS noted in its report. On the trading day following
each proposed offer announcement from 3D Systems, Stratasys shares
gained 11.3%, 6.2%, and 9.0%, respectively. Conversely, on the day
of Stratasys’ announcement of a proposed Desktop Metal transaction,
Stratasys shares fell 4.2%. ISS further noted the significance of
these market reactions by contrasting them with general market
movements in the sector on those days.
It is clear that the 3D Systems deal
is superior to the Desktop Metal transaction in terms of strategic
rationale and shareholder value. In support of this fact, and as a
commitment to Stratasys shareholders to present a certain, superior
and actionable alternative, 3D Systems has executed and deposited
into escrow a binding merger agreement which remains available to
be countersigned by Stratasys following termination of its merger
agreement with Desktop Metal. Additionally, 3D Systems has
committed to pay the full amount of any termination fees due to
Desktop Metal upon the termination of the Desktop Metal merger
agreement and Stratasys’ countersignature of the 3D Systems merger
agreement.
Now is the time for Stratasys
shareholders to send an unequivocal message to the Board to stop
protecting itself and start securing real value. A vote against the
Desktop Metal transaction will, as expressly recommended by ISS,
send a clear message to the Stratasys Board of Directors to accept
3D Systems’ binding offer. 3D Systems’ merger agreement offers
Stratasys the ability to enter into a transaction that creates
unparalleled scale, significant cost synergies to enhance financial
performance and opportunities to invest in long-term growth.
Vote AGAINST the Desktop Metal deal
today.
Other materials related to the upcoming Stratasys shareholder
vote, including 3D Systems’ latest signed merger agreement
delivered to Stratasys are available at:
https://investor.3dsystems.com/overview/default.aspx.
Goldman Sachs & Co. LLC is acting as exclusive financial
advisor and Freshfields Bruckhaus Deringer (US) LLP, together with
Herzog, Fox & Neeman in Israel, is acting as legal counsel to
3D Systems.
About 3D Systems
More than 35 years ago, 3D Systems brought the innovation of 3D
printing to the manufacturing industry. Today, as the leading
additive manufacturing solutions partner, we bring innovation,
performance, and reliability to every interaction – empowering our
customers to create products and business models never before
possible. Thanks to our unique offering of hardware, software,
materials, and services, each application-specific solution is
powered by the expertise of our application engineers who
collaborate with customers to transform how they deliver their
products and services. 3D Systems’ solutions address a variety of
advanced applications in healthcare and industrial markets such as
medical and dental, aerospace & defense, automotive, and
durable goods. More information on the company is available at
www.3DSystems.com.
Forward-Looking Statements
Certain statements made in this document that are not statements
of historical or current facts are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the company to be
materially different from historical results or from any future
results or projections expressed or implied by such forward-looking
statements. In many cases, forward-looking statements can be
identified by terms such as “believes,” “belief,” “expects,” “may,”
“will,” “estimates,” “intends,” “anticipates” or “plans” or the
negative of these terms or other comparable terminology.
Forward-looking statements are based upon management’s beliefs,
assumptions and current expectations and may include comments as to
the company’s beliefs and expectations as to future events and
trends affecting its business and are necessarily subject to
uncertainties, many of which are outside the control of the
company. The factors described under the headings “Forward-Looking
Statements” and “Risk Factors” in the company’s periodic filings
with the SEC, as well as other factors, could cause actual results
to differ materially from those reflected or predicted in
forward-looking statements. In particular, we note that there is no
assurance that a definitive agreement for the transaction
referenced in this document will be entered into or consummated or
that integration will be successful or synergies will be realized
if such transaction were to be consummated. In addition, we note
that Stratasys is not able to countersign a merger agreement with
3D Systems without first terminating Stratasys’ merger agreement
with Desktop Metal, Inc. (“Desktop Metal”) and that the mutual
consent of both Stratasys and Desktop Metal is necessary for
termination of the Desktop Metal merger agreement. We also note
that Stratasys continues to recommend in favor of the Desktop Metal
merger agreement, which remains in full force and effect, and that
the vote by Stratasys shareholders on the Desktop Metal merger
agreement has not yet occurred but is scheduled for September 28,
2023 based on Stratasys’ public filings. Business combination
proposals, transactions and integrations are subject to numerous
risks and uncertainties. Although management believes that the
expectations reflected in the forward-looking statements are
reasonable, forward-looking statements are not, and should not be
relied upon as a guarantee of future performance or results, nor
will they necessarily prove to be accurate indications of the times
at which such performance or results will be achieved. The
forward-looking statements included are made only as of the date of
the statement. 3D Systems undertakes no obligation to update or
revise any forward-looking statements made by management or on its
behalf, whether as a result of future developments, subsequent
events or circumstances, or otherwise, except as required by
law.
All references to the binding nature of the offer and merger
agreement being proposed by 3D Systems, whether in a press release,
presentation, other document or public statement, are subject to
the contents of the escrow letter that was filed by 3D Systems on
September 13, 2023 with the SEC on Form 8-K.
Additional Information
This communication does not constitute an offer to buy or sell
or the solicitation of an offer to sell or buy any securities. This
communication relates to a proposal which 3D Systems has made for a
business combination with Stratasys. In furtherance of this
proposal and subject to future developments, 3D Systems (and, if a
negotiated transaction is agreed, Stratasys) may file one or more
registration statements, proxy statements, tender offer statements,
prospectuses or other documents with the SEC. This communication is
not a substitute for any registration statement, proxy statement,
tender offer statement, prospectus or other document that 3D
Systems and/or Stratasys may file with the SEC in connection with
the proposed transaction.
Investors and security holders of 3D Systems and Stratasys are
urged to read the registration statement(s), proxy statement(s),
tender offer statement(s), prospectus(es) and/or other documents
filed with the SEC carefully in their entirety if and when they
become available as they will contain important information about
the proposed transaction. Any definitive proxy statement(s), tender
offer statement(s) or prospectus(es) (if and when available) will
be mailed to stockholders of 3D Systems and/or Stratasys, as
applicable. Investors and security holders will be able to obtain
free copies of these documents (if and when available) and other
documents filed with the SEC by 3D Systems through the web site
maintained by the SEC at http://www.sec.gov.
This document shall not constitute an offer to buy or sell or
the solicitation of an offer to sell or buy any securities, nor
shall there be any sale of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the
U.S. Securities Act of 1933, as amended.
This communication is neither a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC. Nonetheless, 3D Systems and its directors and
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. You can find information about
3D Systems’ executive officers and directors in 3D Systems’
definitive proxy statement filed with the SEC on April 5, 2023.
Additional information regarding the interests of such potential
participants will be included in one or more registration
statements, proxy statements, tender offer statements, prospectuses
or other documents filed with the SEC if and when they become
available. These documents (if and when available) may be obtained
free of charge from the SEC’s website at http://www.sec.gov.
ContactsInvestors:3D
Systemsinvestor.relations@3dsystems.com
MacKenzie Partners, Inc.Dan Burch / Bob
Maresedburch@mackenziepartners.com /
bmarese@mackenziepartners.com
U.S. Media:FTI ConsultingPat Tucker / Rachel Chesley / Kyla
MacLennan3DSystems@fticonsulting.com
Israel Media:Gelbart-Kahana Investor RelationsAviram
Uziaviram@gk-biz.com+972-525329103
_____________________1 Permission to quote ISS was neither
sought nor obtained.
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