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NEW YORK (
Stratasys (SSYS - Get Report) was advancing Thursday following the desktop 3-D printer's announcement of a deal worth up to $604 million to acquire its Brooklyn, N.Y.-based rival, MakerBot Industries LLC.
Shares of Eden Prairie, Minn.-based Stratasys were gaining 2% to $86.25 in mid-day trading. Stratasys will issue about 4.76 million shares in exchange for 100% of the outstanding capital stock of MakerBot. The proposed merger has an initial value of $403 million based on Stratasys' closing stock price of $84.60 as Wednesday.
MakerBot stakeholders also qualify for performance-based earnouts that provide an additional 2.38 million shares through the end of 2014. The proposed earnouts have an initial value of up to $201 million, based on Stratasys' Wednesday closing stock price.
"Desktop 3-D printers have evolved into systems appealing to professionals and nonprofessional users across a wide range of industries and applications," Stratasys CEO David Reis said on a Thursday morning conference call. "MakerBot has major customers in organizations like General Electric Co., the National Aeronautics and Space Administration, and Lockheed Martin Corp. and it will continue to sell its desktop 3-D printers to other major Fortune 500 companies, as well as small entrepreneurial startups and individuals."
Reis and officials at MakerBot said the deal will allow both companies to cut costs and further tap international markets. "As a combined company, we'll be offering 3-D printers priced from $2,200 to around $600,000 and suitable for home, desktop, professional and industrial uses," Reis said.
"We have the ability to benefit from Stratasys' processes, intellectual property, technical expertise, R&D investment and global reach," MakerBot COO Bre Pettis added on the call.
MakerBot will operate as a Stratasys subsidiary after the deal closes, expected in the third quarter pending customary closing conditions. Pettis will maintain at his post.
The target reported $15.7 million in sales for 2012. It had $11.5 million in revenue for the first quarter of 2013 and has sold more about 22,000 3-D printers since its founding in early 2009.
"Based on industry data, we estimate that MakerBot had more than 20% market share in the personal 3-D printing market in 2011 and expanded market share in 2012," analyst Brian Drab of William Blair & Co. LLC wrote in a note Thursday. "The purchase price represents 38 times 2012 sales and forward multiple of 13.1 times expected 2013 sales."