Proxy advisor ISS opposes Stratasys, Desktop Metal merger in 3D printing

By Svea Herbst-Bayliss

NEW YORK (Reuters) – Influential proxy advisory firm Institutional Shareholder Services recommended 3D printer manufacturer Stratasys shareholders reject plans to buy Desktop Metal, saying another offer “presents a more convincing route to value creation,” in a note seen by Reuters on Wednesday.

ISS’s recommendation, which tends to carry significant weight with shareholders, comes only days before the Sept. 28 vote and marks the latest twist in a years-long drama over how the 3D printing industry may be consolidated.

“It is not clear that it (the all-stock offer Stratasys made for Desktop Metal) creates value for 3D printer manufacturer Stratasys shareholders,” ISS wrote in its note to clients with a headline “vote against acquisition at SSYS meeting.”

Representatives for Stratasys did not immediately respond to a request for comment.

Instead, ISS wrote that a bid from 3D Systems to buy Stratasys, which was disclosed last week and is the latest in a series of overtures to buy the company that now plans to buy someone else, would offer more value to shareholders.

Desktop Metal made its all-stock deal proposal on May 25, valuing its equity at approximately $591 million in aggregate.

The deal would generate about $50 million in revenue synergies plus $50 million in annual cost savings by 2025, the Stratasys board has argued. The directors felt this deal was more attractive than others, including overtures from 3D Systems and Nano Dimension.

But as Stratasys’, Desktop Metal’s and 3D Systems’ share prices have dropped in the last 52 weeks, ISS argued that 3D Systems’ cash and stock offer for Stratasys “holds out an important hedge against further declines.”

3D Systems offered to pay $7 in cash and 1.6387 3D shares per Stratasys share, which would leave them owning 46% of the combined company. Stratasys last week rejected the offer and said it was terminating discussions with 3D.

Stratasys investor Nano Dimension, which owns 14.1% of the company, said last week that it would vote against the merger.

(Reporting by Svea Herbst-Bayliss; Editing by Josie Kao)