With an eye toward driving more growth of 3D printing technology in markets such as medical, Stratasys and Objet this week announced they want to join forces in a company called Stratasys that will be incorporated in Israel.
If shareholders and regulatory authorities approve the merger, it's expected that the companies would be combined sometime this fall.
And it will be the 600-pound gorilla in the 3D printing/direct digital manufacturing world.
|This medical device was built with the help of Objet prototypes.|
In a recently filed annual report, Stratasys says that through 2012 it has shipped approximately 38% of all industrial rapid prototyping systems sold worldwide since 1996. Stratasys says it sold 42% of all industrial RP systems sold globally in 2010 according to an industry research report. Objet, which is based in Rehovot, Israel, has had meteoric growth since its founding in 1998. Objet has shipped 3,378 systems.
In an announcement press release, Scott Crump, chief executive officer and chairman of Stratasys, said: "We are bringing together two of the most innovative and respected players in the field to create a global leader in a high-growth industry. Together we will have a broader and more comprehensive product and technology portfolio, and the resources, team and financial strength to achieve our goals. Building on the success of both companies, I am confident that we will capitalize on the many opportunities this combination creates for our shareholders, channel partners, customers, employees and other important stakeholders. "
Crump will be chairman of the combined company. David Reis, chief executive officer of Objet, will be CEO of the combined company.
The initial board of directors will consist of four seats designated by Stratasys and four seats designated by Objet. One additional seat will be designated by Stratasys and approved by Objet.
Crump was approached by Elchanan Jaglom, chairman of Objet, last fall about the possibility of merging the companies. Jaglom will be chairman of the executive committee of the combined company.
Crump and Jaglom felt the companies had complementary technologies. Crump developed an additive manufacturing technology called Fused Deposition Modeling in which a plastic filament or metal wire is unwound from a coil and enters a heated extrusion nozzle. The nozzle moves in X and Y directions determined by a software program. As one layer hardens, more are added, creating a three-dimensional shape.
The beauty of Crump's process is that it uses commonly available plastics, allowing cost savings and functional testing. It also opened the opportunity for what Crump calls direct digital manufacturing in which large machines can produce parts for assembly and other manufacturing processes. It fits well for production of low volumes of complex parts.
Objet invented PolyJet Matrix Technology, which enables simultaneous jetting of different types of model materials. The dual-jet process can combine materials in several ways, enabling the simultaneous use of two different rigid materials, two flexible materials, one of each type, any combination with transparent material, or two jets of the same material.
Analyst is enthusiastic
Independent analyst Todd Grimm applauds the combination of Stratasys and Objet.
"I am enthusiastic about the merger. I see no downside for the industry and plenty of upside for the merging companies. For the latter, the companies' products are complementary, not competitive. They will blend very nicely (as Stratasys has already shown when it was very successful in distributing Objet systems)."
The opportunities for a combined additive manufacturing powerhouse were laid out by Reis and Crump in a meeting with investment analysts. There are five million 3D CAD seats globally and only 42,500 installed additive manufacturing systems.
Objet, while a smaller company, seems to have carved out a stronger position in medical, an important growth market. One reason is the company's biocompatible VeroBio material. Objet's customers in the healthcare field includes Smith & Nephew and Bayer.
Wall Street reacted favorably to the announcement. The Stratasys stock price jumped more than 16%. Objet is owned privately.
In the meeting with analysts, Crump said that the merger "should not have a significant impact on our relationship" with Hewlett-Packard. In 2011, Stratasys completed the initial term of a Master Original Equipment Manufacturer Agreement with Hewlett-Packard and is now in an extension term, which expires Sept. 30. Under the OEM Agreement, Stratasys is manufacturing a line of FDM 3D printers and related accessories and consumables exclusively for HP for resale under the HP DesignJet brand in Austria, Switzerland and Ireland in addition to France, Germany, Italy, Spain and the United Kingdom. Stratasys said in its annual filing that it believes "this distribution channel continues to be a valuable approach to increase sales and enhance awareness of 3D printing."
Reis told analysts that it was "too early" to report if Objet might be interested in also selling its 3D printers through Hewlett-Packard.
The proposed Stratasys/Objet combination continues a consolidation trend in the additive manufacturing industry. Last November, 3D Systems announced that it was acquiring Z Corp.
Grimm feels there will still be plenty of competition in the additive manufacturing (AM) area.
"Globally, there are still many companies in this industry (granted many are small). But more importantly, I think there are many more ways to create parts additively. So, I think we will actually see a growth in the number of companies making AM technology, at least over time."