Business Context and Reporting Period
This Form 6-K filing by Stratasys Ltd. (the "Company") dated May 25, 2023, discloses the entry into an Agreement and Plan of Merger with Desktop Metal, Inc. ("Desktop Metal"). Under the agreement, a wholly-owned subsidiary of Stratasys will merge with and into Desktop Metal, with Desktop Metal surviving as a wholly-owned subsidiary of Stratasys. The filing details the transaction structure, governance changes, and conditions precedent to closing.
Key Financial Metrics and Transaction Terms
The filing does not provide current revenue, profit, cash flow, or debt metrics for Stratasys or Desktop Metal. The primary financial data relates to the transaction consideration and potential termination fees:
- Exchange Ratio: Desktop Metal shareholders will receive 0.123 Stratasys ordinary shares for each share of Desktop Metal Class A common stock held.
- Equity Conversion: Outstanding Desktop Metal stock options, restricted stock awards (RSAs), and restricted stock units (RSUs) will be converted into Stratasys equity awards based on the Exchange Ratio.
- Termination Fees (Desktop Metal to Stratasys): $18.6 million payable under specific conditions (e.g., superior proposal, change in recommendation). Additionally, reimbursement of transaction expenses up to $10 million may be required.
- Termination Fees (Stratasys to Desktop Metal): $32.5 million payable under specific conditions (e.g., superior proposal, change in recommendation). An additional $19 million fee applies if Stratasys terminates due to a rejection regarding "Identified Agreements." Reimbursement of transaction expenses up to $10 million may also be required.
Material Changes and Governance
Upon closing, the governance structure of Stratasys will change significantly:
- Board Composition: The Stratasys Board will expand to 11 members. Five will be selected by current Stratasys directors, five by current Desktop Metal directors, and Dr. Yoav Zeif will continue as CEO.
- Leadership Roles: Ric Fulop (Desktop Metal CEO) will serve as Chairman of the Stratasys Board. Dov Ofer (current Stratasys Chairman) will serve as Lead Independent Director.
- Shareholder Support: Voting and Support Agreements have been signed by Desktop Metal insiders and major shareholders (including KPCB) representing approximately 19% of Desktop Metal's voting power, agreeing to vote in favor of the merger.
Guidance, Risks, and Conditions to Closing
The transaction is subject to customary closing conditions, including:
- Approval by stockholders of both Desktop Metal and Stratasys.
- Regulatory approvals, including the expiration of the Hart-Scott-Rodino waiting period.
- Listing of the new ordinary shares on the Nasdaq Capital Market.
- Absence of a material adverse effect on either company.
- Amendment or termination of certain "Identified Agreements" to which Desktop Metal is a party.
Risks and Contingencies: The filing highlights risks regarding shareholder rejection, regulatory denial, failure to satisfy closing conditions, and the potential for the transaction to be terminated. The "End Date" for consummation is February 25, 2024, subject to two possible three-month extensions if regulatory approvals are pending. Forward-looking statements warn of uncertainties related to market conditions, supply chain disruptions, and technological changes in the additive manufacturing industry.
Investor Verification Checklist
- Verify the final approval status of the merger by both Stratasys and Desktop Metal shareholders.
- Monitor the status of regulatory approvals, particularly antitrust reviews under the Hart-Scott-Rodino Act.
- Review the upcoming Joint Proxy Statement/Prospectus (Form F-4) for detailed financial projections and risk factors.
- Assess the impact of the 0.123 exchange ratio on current share valuations and dilution.
- Confirm the resolution of "Identified Agreements" that could trigger a $19 million termination fee payable by Stratasys.