Friday, April 20, 2012

With the Stock Up Another 16% Yesterday What the Heck is Stratasys Getting With the Objet Merger? (SSYS)

Closing at $35.98 on Friday the 13th the stock hit $50.95 on Thursday before settling at  $50.73.
If my slide rule is working properly that's 41%.
For the acquirer.
From the Minneapolis StarTribune:

Merger will remodel Stratasys
The merger of Stratasys with Objet Ltd. of Israel would give the Eden Prairie company a second headquarters and greater access to foreign markets for its quick product prototype machines.
Stratasys, an Eden Prairie company whose machines make quick product prototypes, said Monday it is merging with Israeli company Objet Ltd.

The combined company, to be called Stratasys Ltd., would be 55 percent owned by present Stratasys shareholders, who would get one share of the new company's stock for each Stratasys share they now own under the all-stock deal. Stratasys shares jumped nearly 15 percent on the announcement, closing up $5.23 at $41.21.
"I think the primary reason for the deal is that Stratasys can dramatically expand its sales channels, which have been one of the factors limiting its ability to grow faster," said Steve Dyer, an analyst at Craig-Hallum Capital Group in Minneapolis.

Stratasys makes rapid prototyping machines that spray and bake plastic into precise replicas of new products ranging from tools to coffee pots. Industrial corporations can feed electronic product diagrams into the machines to generate instant physical models. In addition to selling the machines, Stratasys sells special plastics, called consumables, that its machines use to make the prototypes.

The new Stratasys would have expanded international marketing reach and would have two headquarters, one in Eden Prairie and the other in Rehovot, Israel. Scott Crump, Stratasys CEO, would become chairman of the combined company, while Objet CEO David Reis would become the combined firm's CEO.
The combined companies would have a market capitalization of about $1.4 billion, Crump said, and the deal is expected to close in the third quarter. Objet has canceled plans for a $75 million initial public stock offering it filed for in March.

The merger comes two years after Stratasys announced a joint marketing agreement with Hewlett-Packard that was expected to increase Stratasys sales fivefold in five years but failed to have much effect. Investor disappointment resulted in a sell-off of the stock last July.

"What's important here is that we are expanding our footprint," Crump said. "We're almost doubling the amount of product and consumables we offer. And we'll have a bigger foothold in the 70 countries both companies are already in."

Despite the HP disappointment, Stratasys' sales have been rising in the past year as the national economy recovered and as research and development investments in its equipment began to pay off, analysts said. Stratasys earned $20.6 million last year, more than double the previous year, on revenue of $155.9 million, up 32 percent....MORE
Objet's Form F-1 was filed in anticipation of a smallish IPO, $75-100 million but with Goldman and JPM as bookrunners and Needham making up the selling group.
The filing was submitted March. 22, 2012 meaning SSYS had to move pretty fast (although not as fast as Warren Buffett on Constellation Energy, 2 hours from the time Sokol called him to say "we should do it boss")
This report from Globes (Israel) says the filing was Mar. 21:
3D printing solutions developer Objet Ltd. has filed a prospectus with the US Securities and Exchange Commission (SEC) to raise $100 million in an IPO at a company value of $500 million in late April or early May.

At the same time, however, interest in the 3D printing industry in general and in the Rehovot-based company in particular, gives Objet another option - acquisition by a multinational electronics and printer company for $500-600 million. So far as is known, there are no offers at the moment, or at least none at the company's asking price.

Objet had $150 million in sales in 2011 and has been profitable for many years. The company has offices near Boston, and in Hong Kong, Shanghai, Tokyo, Rheinm├╝nster, and Gurgaon, India.

Objet was founded in 1998 by veteran Israeli printing engineers, including Gerson Miller, a founder of Idanit Technologies, which was acquired by Scitex Vision in 1998. Objet CEO David Reis also has decades of experience in the industry, having previously held positions at Nur Macroprinters, Scitex Vision, and Idanit.
According to IVC, Objet has raised $28 million from several investors, including Leon Recanati's GlenRock Israel. Scitex Vision sold its 23% in the company for $3 million in 2005, just before Scitex Vision was acquired by Hewlett Packard Co. (NYSE:HPQ), thereby writing off a multimillion dollar investment...MORE
And from the Securities and Exchange Commission:


That's the first 45 pages, the book runs to 161 before exhibits.
2011 revs $121 mil., erns before tax $16.28 mil.
Balance sheet foots at $124 mil. with cash & equivs exceeding total liabilities.