in Additive manufacturing

#Arcam: More M&A in 3D printing

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Unsurprisingly, there is more M&A news coming today out of the 3D-printing space. This time, MakerBot, the leader in desktop 3D printing, is acquired by Stratasys , the leader in 3D printing and additive manufacturing in a $604 million deal. The merger, which will allow MakerBot to operate as a separate subsidiary of Stratasys, will pay $403 million in exchange for 100% of MakerBot’s stock. The remaining two-thirds of the deal will be subject to MakerBot’s performance during the next two years.

It’s no secret that 3D printing has exploded over the last few years, as headlines with news about 3D printed guns making waves. But for most of those who know about the 3D printing industry, it’s the less bombastic uses of 3D printing that made MakerBot an intriguing target for Stratasys. MakerBot – which was co-founded in Brooklyn in 2009 by Bre Pettis – primarily serves consumers and prosumers such as designers and engineers. The company has sold more than 22,000 3D printers since 2009, and in the last nine months, the MakerBot Replicator 2 Desktop 3D Printer accounted for 11,000 of those sales. MakerBot also offers a complete and incredibly accessible ecosystem with products that consumers can print right from home, as well as a community that supports the movement.

In an interview with Forbes (www.forbes.com), Pettis explains that this mission to create a community around 3D printing will only benefit from the merger with Stratasys. “We started MakerBot in 2009 and made a conscious decision to educate people with the possibilities they could do with 3D printing and share with people what is possible. We have always moved with this approach of sharing and educating people with what they can unlock with 3D printing. With this merger now we can take it to a whole new level.”

Pettis also notes that the merger was a natural progression for the company and will provide MakerBot “access to worldwide infrastructure to make things happen,” accelerating the growth of global adoption. David Reis, Stratasys CEO, added that “Bre Pettis and his team at MakerBot have built the strongest brand in the desktop 3D printer category by delivering an exceptional user experience. MakerBot has impressive products, and we believe that the company’s strategy of making 3D printing accessible and affordable will continue to drive adoption.”

Ultimately, this deal will help both MakerBot and Stratasys have a much stronger impact in several verticals. Pettis explained, “The future is bright. There is so much potential for this technology to have a deep impact on people in different industries and on different people – whether you’re an architect, product designer, or if you just make things. By merging, we’re going to be able to bring this to more people and make it more of a mainstream thing.” He added that he thinks “We’re on the brink of the next industrial revolution. Instead of buying things, you can make them on a printer. When you have a 3D printer, you can iterate more – what used to take months, now takes hours.”

With this merger, MakerBot and Stratasys will be leading the way on that revolution – but not without a cause. As Pettis said, ”We want to grow those possibilities, impact, and innovate the world to make it a better place.”

The deal for MakerBot also represents another rich exit for a New York start-up, following the $1bn sale of Tumblr to Yahoo earlier this year. According to the Financial Times, if the full amount is paid out, Stratasys will be paying about 38 times trailing full-year revenues for MakerBot, which were $15.7m in 2012.

“I feel comfortable with the deal,” said David Reis, Stratasys chief executive. “It’s in line with current market multiples and valuations.”

Bre Pettis, chief executive and co-founder of MakerBot, said: “It’s like a peanut and chocolate type of a story.

“They are better together than they are apart.”

Mr Pettis said that Stratasys would help MakerBot reach more customers, while Mr Reis said he would let the company “pick and choose” which aspects of Stratasys it incorporates.

3D printing is changing the way big companies such as Nike and Adidas develop new products, allowing them to rapidly prototype new versions at previously unattainable speeds.

MakerBot had taken just one $10m round of venture capital funding, according to Crunchbase, the technology database group. Among the investors in that initial round was Bezos Expeditions, the personal venture capital firm of Amazon chief executive and founder Jeff Bezos.

MakerBot has sold 22,000 printers since 2009, the companies said, with half of those sales coming in the past nine months.

Naturally, deals like this will sooner or later spill over to Sweden listed Arcam as well. Looking at the valuation, Stratasys is paying 38 times 2012 revenues for MakerBot. Applying this multiple to Arcam, which had 2012 revenues of SEK 139m, we get a value of SEK 5,282m (take aside net debt which is negligible in Arcam’s case). This compares to the current market cap of around SEK 1,266m, i.e. a substantial upside to current levels.

Newsflow around Arcam remains positive and we continue to consider it a good momentum play.

Nordic Investor

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