Competition in the 3D printing market is heating up with the entry of companies like Canon, Hewlett-Packard, Autodesk and Epson. The current market leader 3D Systems Corporation (NYSE:DDD) is betting big on acquisitions to challenge its bigger new entrants with fat pockets. On Monday, the Avi Reichental-led company announced that it has signed a deal with Israel-based CAD/CAM software maker Cimatron Ltd. (NASDAQ:CIMT).
Cimatron stock rallies 43%
Shares of Cimatron rallied more than 43% following the announcement. 3D Systems has agreed to pay $8.97% per Cimatron share, a 47.5% premium to the stock’s Friday closing price. It values the Israeli company at $97 million. The deal will strengthen 3D System’s position in the rapidly-growing 3D manufacturing and design business. It will also add “complementary products and technology” to 3D Systems’ portfolio and expand its sales coverage.
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The Rock Hill-based company expects the acquisition to be accretive to its non-GAAP earnings immediately after the transaction. The deal has already been approved by boards of the two companies. Pending regulatory approvals, Reichental expects to close the transaction in the first quarter of 2015. Cimatron has two major products, GibbsCAM and CimatronE, which are used by “a growing number of companies” worldwide.
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3D Systems was advised by Needham & Company, while Hunton & Williams LLP and Gornitzky & Co served as its legal counsel. Prometheus Financial Advisory served as a financial advisor to Cimatron. The deal comes just a few months Stratasys, Ltd. (NASDAQ:SSYS), the biggest rival of 3D Systems, acquired GrabCad in September for around $100 million.
Last week, Jefferies analyst Jason North slashed his price target on 3D Systems from $46 to $42, citing rising competition and execution risks. The analyst says 3D Systems has purchased about 50 companies in the past few years. Integrating and streamlining its acquisitions will be a big challenge. 3D printing companies have been boosting their capabilities ahead of Hewlett-Packard’s entry in the market in 2016.
3D Systems shares increased 3.13% to $36.25 at 10:42 AM EST on Monday.