Tug of war intensifies over Stratasys 3-D printer manufacturer

Stratasys, the 3-D printer maker based in Eden Prairie and Israel, is still a hot commodity as the industry looks to consolidate.

Two companies vying to buy the company through unsolicited billion-dollar bids increased their offers — again.

Stratasys leaders sent a letter to shareholders outlining their case that their plan to buy a competitor is the company's best path forward.

A big institutional investor is not convinced by Stratasys' case, saying the company would be more valuable if the board openly sought outside offers.

Shareholders will have a chance at the company's annual meeting Aug. 8 to vote between a slate of board candidates offered by the company and one offered by one of the suitors, Nano Dimension, which is Stratasys' largest shareholder.

The Stratasys board urged shareholders to vote for their slate of directors.

The board on Friday unanimously rejected the latest tender offer from Nano, which is seeking to acquire a controlling interest in Stratasys. Nano had upped its initial offer of $18 a share twice. The latest is $20.05 share, or about $1.15 billion.

There is a lot of interest in the industry because the 3-D printer market is growing rapidly. Research suggests the industry could have a compound annual growth rate in the range of 21% to 23% over the next five to seven years.

Companies with the most size and scale would be expected to have the most success in capturing that growth.

3D Systems CEO Jeffery Graves called Stratasys' decision to reject the company's offer "perplexing."

"Frankly, we are surprised that in their quick rejection Stratasys' board did not acknowledge or refute the merits of our proposed transaction," Graves said in a statement.

3D said it also heard surprise from several Stratasys shareholders. The Donerail Group, a Santa Monica, Calif.-based investment firm, went public with its views Thursday, saying it is skeptical of the Desktop Metal deal and encouraged Stratasys to consider the 3D Systems deal.

Frustrated with meetings they had with management and unable to meet with the Stratasys board, Donerail wrote: "A 3D Systems transaction is significantly more compelling than the current alternatives and warrants immediate engagement."

Even though the offers from Nano Dimension and 3D Systems were at a premium to what Stratasys was trading at earlier this year, the Stratasys board and analysts who follow Stratasys largely believed the deals undervalued Stratasys.

The revised offer from 3D Systems is an extension of discussions the two sides have had for years, including a meeting last September in which they discussed cost savings from a combined company.

Greg Palm, who covers the 3-D printing space for Craig-Hallum, wrote in his most recent investor note about the the swath of offers and speculated the increased attention could bring other competitors into the bidding.

"We continue to highlight other potential parties with exposure to additive [manufacturing] that may be looming in the shadows, namely HP, General Electric and Nikon," Palm wrote. "Overall, we continue to expect the entire industry, especially Stratasys, will get a lift from this heightened M&A activity."