Stratasys, Inc. (SSYS: Quote), a manufacturer of 3D printers for rapid prototyping, on Monday said it agreed to merge with a subsidiary of Israel's privately held rival Objet Ltd. in an all-stock deal to form a combined entity worth about $1.4 billion.
The transaction will be taxable to Stratasys shareholders.
The new combined entity will be known as Stratasys Ltd. and will focus on high-growth 3D printing and direct digital manufacturing industry. Stratasys also projects better-than-expected adjusted earnings and revenues for its first quarter.
Each Stratasys shareholders will receive one share of the new company. Following the deal closure, Stratasys shareholders would own 55 percent and Objet shareholders would own 45 percent of the combined company. The transaction got the approval of both the boards and is expected to be completed in the third quarter of 2012.
Meanwhile, Stratasys board has unanimously adopted a limited duration Rights Agreement to protect itself from being acquired. The offer is such that if anybody tries to buy the company, by purchasing more than 10 percent stake, the offer comes to existence. The Rights will expire on the earlier of April 13, 2013 or the closing of the company's merger with Objet, unless it is redeemed earlier.
The company also declared a dividend distribution of one common share purchase right on each outstanding share of its Common Stock.
Following the combination, Objet's current Chief Executive Officer David Reis will become the new CEO. Scott Crump, co-founder, current chief executive officer and chairman of Stratasys, will become full-time chairman, while Elchanan Jaglom, current Chairman of Objet, will serve as chairman of the executive committee.
The combined company will maintain Stratasys' and Objet's current headquarters in Minnesota and Israel, respectively, while it will continue trading on NASDAQ under the ticker SSYS.
Stratasys expects that the transaction would be accretive to cash earnings per share within the first 12 months after closing. Beginning 18 months after the deal closure, the combined company also expects to generate between $7 and $8 million of annual net cost synergies.
On a pro forma basis, the combined company expects to significantly improve its long-term operating model and to achieve annual revenue growth of at least 20 percent, adjusted operating margin between 20 and 25 percent and adjusted net income margin between 16 and 21 percent.
Further, announcing its preliminary first-quarter numbers, Stratasys said it expects net income to be approximately $4.3 million to $4.7 million, or $0.20 to $0.22 per share, lower than last year's $5 million or $0.23 per share. Adjusted earnings, which excluded certain items, would increase to about $5.6 million to $6.3 million or $0.27 to $0.29 per share from $4.4 million or $0.21 per share a year ago. Revenue is also projected to grow 31 percent to approximately $45 million.
On average, five analysts polled by Thomson Reuters expect earnings of $0.26 per share on revenues of $41.64 million for the quarter. Such estimates typically exclude special items.
Stratasys said it plans to provide full financial results and updated 2012 guidance on a standalone basis on May 9.
Stratasys shares closed Friday's regular trading at $35.98, down $0.07 or 0.19 percent.
by RTT Staff Writer
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