Stratasys, Ltd. (SSYS), 3D Systems Corporation (DDD): How to Profit From Changes in the 3-D Printing Universe

Stratasys, Ltd. (NASDAQ:SSYS)It’s buying season for the 3-D printing space as leading companies in the industry are busy acquiring smaller firms that complement their business models and give them an edge over the competition. As 3-D printing becomes a more accessible technology for consumers and expands its use for industrial purposes, industry leaders seem to be focusing on maintaining and gaining market share through strategic purchases.

Stratasys and Makerbot get hitched

Stratasys, Ltd. (NASDAQ:SSYS), a leading manufacturer of professional 3-D printers and printing materials, recently acquired start-up Makerbot Industries. Makerbot provides 3-D printing solutions to “prosumers,” like engineers and designers, and markets its product to the consumer segment of the market. Its Replicator 2 desktop 3-D printer model carries a price tag that’s more affordable to an average consumer.

Credit: Stratasys, Ltd. (NASDAQ:SSYS)

According to Bloomberg, the deal involves the issuance of 4.76 million shares, worth $403 million, in exchange for Makerbot. Afterwards, Makerbot is required to make performance-based payments that could increase the purchase price by $201 million. After the merger, the share price of Stratasys, Ltd. (NASDAQ:SSYS) rose 2.8% in after-hours trading.

The acquisition is expected to be mutually beneficial for both companies — Stratasys’ influence in the industry and resources are expected to help the Replicator reach a wider audience, while the Replicator gives Stratasys, Ltd. (NASDAQ:SSYS) access to the consumer segment of the market. Both companies estimate that between 35,000 and 40,000 desktop 3-D printers were sold in 2012 and sales are expected to double in 2013. The transaction finalizes in the third quarter of 2013, and MakerBot is expected to operate as a separate subsidiary, with its own identity, products, and market strategy.

Catering to both amateurs and pros

As Makerbot’s Replicator makes its way to your local store, it will share space on the shelf with 3D Systems Corporation (NYSE:DDD)’s  Cube, another 3-D desktop printer marketed to the consumer segment. The printers are very similar and allow users to choose between two types of plastics to build their 3-D designs.

On the professional side, 3D Systems Corporation (NYSE:DDD) is expanding the types of materials it uses for industrial purposes. The company recently signed on to acquire 80% of Phenix Systems, a French manufacturer of direct metal 3-D printers that can print metal and ceramic parts from very fine powders. Metals include stainless steel, as well as superferrous and non-ferrous alloys. Being able to provide customers with direct metal-printing technology gives 3D Systems Corporation (NYSE:DDD) greater access to the aerospace, automotive and medical device industries. Phenix provides complementary materials and printers to the company and 3D Systems should be better able to respond to accelerating demand for direct metal printing.

The transaction is expected to close in July 2013 and afterwards 3D Systems Corporation (NYSE:DDD) plans to launch a takeover bid for the remaining 20% stake in Phenix. The maximum price payable by 3D Systems for 80% of Phenix’s shares is estimated to be $17.36 per share.

Focused on industrial design and processes

Dassault Systemes is another company providing 3-D printing design software and consulting for the industrial sector. The company’s expertise lies in its digital mockups, or 3-D digital prototypes, and product lifecycle management solutions, which allows its customers to design and render products virtually. So far, the company hasn’t shown interest in the non-professional segment of the market.