Oct 21, 2016 | By Alec
Back in September, a shock announcement sent ripples through the 3D printing market. Industrial world leader General Electric made an unexpected offer of a combined $1.4 billion to take over two of the driving forces behind metal 3D printing, Arcam AB and SLM Solutions. While just the announcement made share prices rise throughout the industry, we will have to wait and see if this deal becomes a reality. The Elliot Management hedge fund of billionaire investor Paul Singer, who owns 20 percent of SLM shares, is now opposing the take-over. It is not known what this sudden move means for the Arcam deal.
The bid itself reflected the maturation of the companies’ metal 3D printing technologies, with GE reportedly planning to become a driving force in this fledging sector. In fact, they were supposedly planning to build a $1 billion-a-year 3D printing empire by 2020. Many shareholders evidently agreed with this positive perspective, with stocks rising throughout the industry. 3D Systems Group stock rose by 7.2%, Stratasys Ltd increased by 6.7% and Voxeljet AG jumped by 9.2% on the New York Stock Exchange. Somewhat perversely, GE shares fell 1.3% to $30.88 in the immediate aftermath of the bid. A veritable gold rush in 3D printing acquisitions was expected, though that positive atmosphere might be somewhat diminished if this deal doesn’t go through.
So what happened? Though the acceptance process was underway for some time, Singer’s Elliot Management Corp. threw up a late obstacle on Thursday – saying they would oppose the current terms of tender offer. According the group, that owns more than 20 percent of outstanding SLM shares, GE’s offer is “not in the best interests of SLM shareholders.” GE has not responded to this opposition yet.
This opposition has appeared on the eve of Friday’s deadline for GE, which is now faced with three options: to improve their tender offer to SLM shareholders, extend the deadline or stick to their original offer. Should GE not improve their offer or extend the deadline, the tendering process will end on Monday. But if shareholders have tendered 75 percent or more of the total shares, GE is obligated to complete the deal. However, GE can also walk away from the deal if only a minority stake is assembled. SLM previously endorsed the 38 euro per share offer by GE, a 37 percent premium at the time.
Paul Singer.
So what will happen? According to Bloomberg, GE will call the bluff of Elliott Management, setting up a game of chicken. SLM shares themselves have more than doubled in value over the past year (giving the company a market value of about 710 million euros, or approximately $777 million USD), so quite a lot is at stake. This is not the first time Singer attempted to exert influence over the company’s capital structure.
This is quite unfortunate for GE, as even the Arcam deal isn’t without its problems. GE already had to extend the Arcam offer period as well, after failing to find a sufficient Arcam shareholders willing to accept the offer – only 40 percent were on board. Initially expiring on 14 October, that period was extended to November 1.
In the meantime, Arcam itself has been faced with a hesitant market. They revealed that their growth was relatively modest at 10 percent for the first nine months of 2016, with operating income down with -0.7 (36.2) MSEK. “The market is currently slightly hesitant and as a result we see that it takes longer to close new orders. This is partly a result of the uncertainty over the company’s future ownership structure,” they said. “We continue to pursue and develop our long-term strategy to industrialize the EBM technology and simultaneously developing the metal powder manufacturing and contract manufacturing businesses.”
What’s more, the Swedish company felt that the GE offer was a public sign of confidence. “For us at Arcam the tender from GE is a strong confirmation that the company we have built, our team together with you and other partners, is a major player in the additive manufacturing industry and an attractive partner to GE,” they say in their interim report. They further revealed that GE plans to retain and expand Arcam’s current customer base (focus on aerospace and orthopedics), while keeping existing staff and management onboard. As a result, the company’s executive board recommended shareholders to accept the GE offer.
Posted in 3D Printer Company
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