Investor Donerail Group criticizes Stratasys for merger plans with Desktop Metal

A few weeks ago, 3D printer manufacturer Stratasys announced a merger with Desktop Metal. However, Donerail Group LP, an investment company that holds around 2.3% of the outstanding shares of Stratasys, has now expressed concerns about the planned merger. In an open letter, it questions the strategic and financial benefits of this merger.

Stratasys shareholders would own about 59% of the merged company under the deal announced in May, with Desktop Metal shareholders owning the rest. Since the announcement of this deal, 3D Systems has also made several public offers to merge with Stratasys. While Stratasys has so far held firm on the merger with Desktop Metal, 3D Systems said it would offer a better deal for shareholders. Donerail Group apparently sees it similarly to 3D Systems.

In a letter to Stratasys, Donerail Group states that it has held several private meetings with Stratasys’ management team. However, the most recent meeting last week raised “a heightened level of concern about the governance and strategic direction” of the company.

Donerail Group is particularly critical of the board’s “clear, inexcusable and continued refusal to engage with serious interested parties regarding a sale of the company over the past two years.” It is calling for an immediate remedy to this “negligence in breach of duty.”

According to a regulatory filing disclosed by Stratasys on June 20, 2023, the company has received at least 12 unsolicited acquisition offers from at least three “serious” acquirers since January 2021. Donerail Group claims that Stratasys has rejected 11 of 12 offers without engagement. It also points out that one of the offers exceeded a 60% premium to the trading price at the time of the offer. “Such blind and unthinkable rejections have cost Stratasys shareholders dearly,” the Donerail Group letter states.

Donerail Group urges Stratasys’ board to heed its fiduciary duties to shareholders and not stick to an inflated execution story that is fraught with challenges. It hopes that no further action will be required beyond this letter and expects that the Board will be properly advised on how to proceed.