Stratasys has announced the filing of a proxy statement with the U.S. Securities and Exchange Commission in connection with its 2023 Annual General Meeting of shareholders, which is scheduled to be held on August 8, 2023. The company has also issued a letter to its shareholders regarding the special tender offer from Nano Dimension in connection with the proxy statement.
Stratasys’ letter to shareholders highlights the company’s record of ‘strong performance’ and its ‘strategy for value creation’. Stratasys is recommending that its shareholders vote for the re-election of the Stratasys slate, consisting of eight current members of the Stratasys Board.
The full text of the letter is below:
Dear Stratasys Shareholder,
With a winning strategy for profitable growth, a highly experienced management team and a purpose-built Board of Directors, Stratasys is well positioned to create value in the near, mid and long term.
Stratasys is successfully executing its “North Star” strategy, moving to stronger and more profitable growth while expanding into new technologies, verticals and innovative use cases for its leading polymer capabilities and broad portfolio of solutions. In addition, our proposed combination with Desktop Metal, Inc., which we expect to be put to a shareholder vote later this year, will accelerate our mission of leading additive manufacturing into mass production. The combination will create a next-generation additive manufacturing company with enhanced growth and profitability, and is expected to generate more than $1.6 billion of revenue and more than $300 million of EBITDA in 2026 at base case.
Nano’s Self-Serving Campaign Risks Derailing Future Growth Opportunities
We strongly believe the highly opportunistic, self-interested campaign by Nano Dimension Ltd. (“Nano”) to take control of Stratasys puts your investment at risk by threatening to derail our significant progress, dismantle Stratasys’ proposed combination with Desktop Metal and destroy value for Stratasys shareholders. The Stratasys Board has not changed its unanimous approval, recommendation and declaration of advisability of the Desktop Metal transaction.
If Nano’s slate is elected, Nano would be able to accomplish its goal of acquiring control of Stratasys without paying Stratasys shareholders or closing the tender offer. To be clear, the election of Nano’s slate would not automatically result in the closing of Nano’s partial tender offer, which is subject to various conditions that are unlikely to be fulfilled by either the currently proposed expiration date of Nano’s partial tender offer, or the date of the Stratasys Annual General Meeting.
Ahead of the Stratasys Annual General Meeting on Tuesday, August 8, 2023, we urge you to vote “FOR” the re-election of the Stratasys slate consisting of the eight highly qualified current members of Stratasys’ Board.
Nano’s Slate of Insider Candidates for the Stratasys Board is Unqualified and Its Campaign to Take Control of Stratasys is Built on Serving the Interests of Nano
Nano has nominated an unqualified slate of director candidates in an attempt to seize control of Stratasys. Six of its seven nominees for the Stratasys Board are current Nano executives, including its CEO Yoav Stern, meaning that there would be significant conflicts of interest between their roles at Nano and their roles as directors of Stratasys. How could a board consisting of executives of another participant in the additive manufacturing industry, five of whom report to Mr. Stern, be trusted to act independently and in the interests of all Stratasys shareholders?
Only two Nano nominees have served on a public company board over nearly the last 20 years, and most of the nominees lack experience running 3D printing companies, as well as companies that are of a comparable scale to Stratasys.
Nano’s campaign is an attempt to distract its own shareholders from its failing business model, its track record of value destruction and its underwhelming operating results. It is no surprise that Nano has nominated six of its own executives for the Stratasys Board. Nano’s – and Mr. Stern’s – history of corporate governance and management failings and blatant lack of regard for its own shareholders includes:
- Under the leadership of Nano’s nominees, Nano is trading at a significant discount to the value of its cash and tradable securities, reflecting Nano shareholders’ lack of confidence in the ability of Nano’s management, and consequently the Nano nominees, to create shareholder value.
- Nano’s business continues to burn significant cash, including nearly $28 million in net cash used in operations in the first quarter of 2023. While Nano reported net income of more than $22 million in the quarter, its investment in Stratasys generated more than $40 million of profits in that time, meaning its business generates significant losses, as reflected by their negative $23.7 million of adjusted EBITDA in the first quarter.
- Consistent with the recommendations of all three major, independent proxy advisory firms, Nano’s own shareholders voted to remove four members of Nano’s Board and appoint two new members in their place at a special meeting on March 20, 2023, a fact that Nano’s leadership refuses to accept and which they are now battling in an Israeli court. As a result, the legality and authority of Nano’s Board and management team continue to be in question.
- Nano pursues value destructive acquisitions to avoid returning cash to shareholders (e.g., DeepCube, NanoFabrica). The acquisitions they made in 2021 and 2022 cost Nano hundreds of millions of dollars, and yet Nano had to write off the value of these acquired businesses the same year they were acquired.
- Nano does not disclose the voting results of its director elections and changes classification of directors to avoid facing shareholder votes. Further, Nano’s classified Board with three-year terms limits the ability of shareholders to hold the Board accountable for performance.
- The Nano Board intended to reprice Mr. Stern’s severely out-of-the-money options, which proxy advisory firm Glass Lewis described as “excessive compensation” and which shareholders voted down at the special meeting in December 2022.1
- The election of Nano’s slate of nominees would take Stratasys out of compliance with the Nasdaq requirement that a majority of the board of directors be independent. Election of Nano’s slate would also make Stratasys non-compliant with the Securities and Exchange Commission and Nasdaq audit and compensation committee corporate governance rules.
Be aware: Mr. Stern’s destructive behavior is nothing new. Mr. Stern was removed as interim president and CEO of Magal Security Systems (“Magal”) in 2009 after causing what Magal described as “an almost irreparable damage in the morale of the remaining employees” who “operated in a hostile environment and were terrified by his managerial style.”2 In a letter to shareholders regarding a challenge led by Mr. Stern to Magal’s Board, Magal further noted that “After Mr. Stern joined the Company, he clearly indicated to certain employees that his real intention was to cause a management buy-out where the shares of the Company would be purchased at a low price by management.”3 Mr. Stern also reportedly attempted to extort Magal’s largest shareholder in order to prevent him from voting at the shareholder meeting on Mr. Stern’s board challenge.4
Thank you for your support.
The Stratasys Board of Directors
The letter can also be found here.
On July 10, 2023, Nano Dimension increased the price of its special tender offer from 20.05 USD per share to 24.00 USD per share. Stratasys responded the same day with a statement saying it will review and evaluate the revised offer to determine a course of action in the best interests of the company and its shareholders, and said it advised shareholders to take no action at this time, and would inform them of the Board’s position regarding the offer within ten business days.