Oct 24, 2016 | By Alec

It looks like one of the biggest deals in the 3D printing market is about to fail, with the GE’s tender offer deadline for the takeover of SLM Solutions set to be reached today. The acquisition offer, which was first announced in September, previously put metal 3D printing in the spotlight and sent ripples through the 3D printing market. For 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, the opposite can be expected now that the SLM deal is off the table. Late last week, with the deadline in sight, the Elliot Management hedge fund of billionaire investor Paul Singer (who owns 20 percent of SLM shares) revealed to be opposing the takeover. GE, meanwhile, did not want the change the terms of the deal. If GE cannot reach an agreement with shareholders, the company would be willing to walk away from the deal, GE Chief Financial Officer Jeff Bornstein said. “We have other options.” What’s more, the Arcam deal might be not be concluded either, as Singer owns shares in that company as well.

In the immediate aftermath of Singer’s opposition, shares in SLM Solutions already fell a sharp 11 percent. As Singer’s Elliott Management said on Thursday, GE’s offer is “not in the best interests of SLM shareholders”, adding that it undervalued the company and that they would therefore not accept. GE reportedly offered to purchase SLM for €38 per share, representing a premium to their trading price of 37 percent. So far, about 34 percent of shares were already tendered, including those of main shareholder and SLM chairman Hans-Joachim Ihde, with 75 percent being necessary to complete the deal. This left Elliot, as a the second-largest stakeholder with 20 percent of all shares, in an excellent position for opposition.

Singer’s Elliot Management has built up a reputation for investing in acquisition targets and subsequently holding out for a better price during takeover bids. The same recently happened when Canon was interested in taking over more shares in Axis Communications AB, and Elliot also initially refused to tender its stake in Industrial & Financial Systems IFS AB to EQT Partners AB. In the latter case, they succeeded in raising the offer by about nine percent.

So what will happen now? In response to the opposition, GE could opt to extend the tender deadline offer beyond today, or change its terms. But they already said on Friday that they would do no such thing, and the 11 percent drop in SLM shares suggests that investors believe that GE will not take over the company. “GE is making clear they are not willing to pay more and prolong the acceptance period,” said Thomas Effler, analyst at BHF-Bank Aktiengesellschaft.

The takeover plans itself were aimed at boosting GE’s position to integrate new manufacturing innovations, and revealed that the company saw metal 3D printing as a strategic priority. “GE expects to grow its new additive manufacturing business to $1bn of sales ‘at attractive returns’ by 2020,” industry analysts from Credit Suisse said at the time of GE’s bid announcement. Both SLM Solutions and Arcam were optimistic about GE’s combined $1.4 billion plans, saying that the takeover featured an attractive premium and would boost the development of both companies.

GE is particularly focused on aerospace and aircraft 3D printing applications, with the two companies representing a lion’s share in 3D printing efforts in those sectors. Through the acquisition, GE said, they would be able to 3D print complex metal parts at lower weights and lower costs than traditionally used components. “Eventually, companies here are going to hit escape velocity in terms of scale,” GE Chief Executive Jeff Immelt had told investors back in September “We want to be one of the companies that does that.”

GE, however, is not giving up on metal 3D printing – despite refusing to raise its price for SLM Solutions. “We and the leadership at SLM think the offer we put on the table was a very good offer,” Bornstein said of the situation. “We have options and alternatives. We don't have to do SLM. We'd like to. We like the company, we like the technology, we like the people.” Bornstein further referred to GE’s falling share prices, which reduced the company’s value to $742.49 million.

Of course one of those alternatives is already being pursued with Arcam, but the same problem has arisen there. GE already chose to extend the Arcam tendering offer period, after failing to find a sufficient Arcam shareholders willing to accept the offer – only about 40 percent were on board. Initially expiring on 14 October, that period has been extended to November 1. But Elliot Management has also taken a 10.14 percent stake in Arcam, and the same kind of opposition can be expected. But GE has already said that they also have their eye on alternatives to Arcam, so one thing seems certain: GE is not about to give up on their plans to become a world leader in metal 3D printing.

 

 

Posted in 3D Printer Company

 

 

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