Stratasys Ltd. expanded its contract manufacturing Wednesday by announcing that it will buy two 3-D printing service providers in California and Texas.
Eden Prairie-based Stratasys will pay about $295 million for Solid Concepts Inc. in Valencia, Calif., and an undisclosed sum for the smaller Harvest Technologies of Belton, Texas.
Both privately held firms will be rolled into Stratasys' RedEye contract manufacturing subsidiary, also based in Eden Prairie. The deals are expected to close in the July-to-September quarter and contribute to Stratasys' earnings in their first year, the company said.
"These acquisitions will definitely make our contract manufacturing business a meaningful piece of our overall business. Whereas today, it's relatively small," said Stratasys Investor Relations Vice President Shane Glenn. The two companies will also "substantially" expand Stratasys' medical and aerospace customer base, Glenn said.
The majority of what Stratasys does today is manufacture large commercial 3-D printers, which generate computer-designed objects using a heated resin that cools and hardens.
It also makes components from 3-D printers for manufacturers, but that is smaller business and a skill set Stratasys has been trying to grow through RedEye.
Company executives said they worked nine to 12 months to buy Solid Concepts and Harvest Technologies.
Both firms "are industry pioneers and innovators," Stratasys CEO David Reis said. With them, "We expect to significantly expand our [custom manufacturing] offering, target new applications and strengthen our customer relationships."
Reaction from Wall Street was favorable. Stratasys shares closed Wednesday up 0.8 percent, or 84 cents, to $111.81.
Piper Jaffray analysts "applauded the acquisition."
J.P. Morgan analysts said the deal was "positive" and "makes strategic sense." Its analysts said Solid Concepts' revenue is expected to grow from $65 million today to about $85 million next year, and that it alone would double Stratasys' contract manufacturing business to about 22 percent of total revenue.
Solid Concepts was founded in Valencia, Calif., in 1991. Today, it has 450 employees, six factories and $65 million in annual sales. The firm in the past has managed usage of Stratasys printers leased by factories.
Solid Concepts uses a wide array of 3-D printers to manufacture plastic and metal prototypes and components for the medical and aerospace industries. Stratasys devices do not currently print with metal.
By offering 3-D printers made by other manufacturers through its expanded services unit, Stratasys expects to broaden the solutions it can offer. "To best serve customers you need to offer a wide range of technologies and solutions," Glenn said. "In manufacturing, there is no one-size-fits-all technology."
The 19-year-old Harvest Technologies, which has 80 workers, also uses various brands of 3-D printers to make plastic parts for medical, aerospace and consumer product manufacturers. Some Wall Street analysts estimated that Stratasys is spending about $60 million for Harvest.
"In that sense, its [customer types] are not too dissimilar from Solid Concepts or RedEye," said RedEye General Manager Jim Bartel. But both Solid Concepts and Harvest are heavier in medical and aerospace than RedEye.
Stratasys, however, is much larger with 1,800 global employees, nearly $500 million in annual sales and three key businesses. In addition to its RedEye services unit, Stratasys has its main commercial 3-D printer business in Eden Prairie and Israel and a New York-based operation called MakerBot that produces consumer-grade 3-D printers.