Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
This was a busy week in the 3-D printing sector, with both leading companies, 3D Systems Corporation (NYSE: DDD ) and Stratasys (NASDAQ: SSYS ) announcing acquisitions. Interestingly, Stratasys out-acquisitioned 3D Systems, the Pac-Man of the sector, this week.
While "Acquisition Wednesday" might not be as catchy a title as the '80s hit song "Manic Monday," it was certainly an apt moniker for the 3-D printing world this week, as 3D Systems announced an acquisition and Stratasys announced it's buying two companies.
3D Systems is acquiring Medical Modeling, which focuses on using 3-D imaging and printing technologies to produce anatomical models for surgical planning, and also manufactures medical devices. The terms of the deal weren't disclosed, so we have no idea what it's paying. We do know, however, that the acquisition will be "immediately accretive" to 3D Systems' earnings, which is naturally a positive.
Notably, this deal means that 3D Systems will possess the largest combined 3-D printing personalized surgery and medical device services and production operation. Additionally, 3D Systems will now possess the only integrated 3-D modeling-to-printing capability available in both metals and biocompatible plastics; this capability allows it to produce FDA-approved devices.
On the plastics and composites end, Medical Modeling has been using stereolithography since the mid-1990s, color jet 3-D printing since the late 1990s, and PolyJet printing since 2008, according to its website. The first two technologies are 3D Systems' technologies, while PolyJet is prime competitor Stratasys' technology. On the metals end, Medical Modeling is using Arcam's electron beam melting systems to produce medical implants. So, this deal should also help Arcam's coffers, assuming 3D Systems continues using the EBM systems, and the use of these systems increases. Given 3D Systems now has competing technology -- which it acquired when it bought Phenix Systems last summer -- it should be interesting to see what happens here.
This move further enhances 3D Systems' health-care portfolio, which accounted for 20% of the company's product revenue in 2013. While the health care sector is in the relatively early stages of adopting 3-D printing, it's already well on its way to revolutionizing the medical world. That's largely because 3-D imaging and printing allow for more precise surgical planning, and for the production of products custom made to fit individuals. The latter, of course, is of critical importance when we're talking about devices such as implants and prostheses; traditional manufacturing techniques can't always produce such exact-fitting devices. Further, exciting progress is being made by entities such as Organovo in tissue engineering -- or "bioprinting" -- with the ultimate goal of producing organs that can be used in transplants.
Stratasys is buying Solid Concepts and Harvest Technologies. Solid Concepts is the largest independent 3-D printing services operation in North America, while Harvest Technologies reportedly has expertise in advanced parts production and materials. Stratasys is paying up to $295 million for Solid Concepts, which generated revenue of approximately $65 million last year, while the terms of the Harvest deal weren't disclosed. Both acquisitions, which are slated to close early in the third quarter, are expected to add to Stratasys' non-GAAP earnings within one year of closing.
These acquisitions benefit Stratasys in two ways: they provide cross-selling opportunities and allow for an entrée into the metals 3-D printing space, which appears to be on the cusp of an incredible growth trajectory. You can read my more in-depth take here.
Stratasys ends the week with another buy
Stratasys announced on Friday that it is acquiring "certain assets" of Wisconsin-based Interfacial Solutions, which is a contract provider of thermoplastics R&D and production services. The terms of the deal, which is expected to close in the second quarter, were not disclosed.
Interfacial has partnered with Stratasys for its fused deposition modeling, or FDM, product lines over the past three years. Stratasys CEO David Reis commented that this acquisition should "accelerate Stratasys' materials development efforts for all of our FDM platforms, including MakerBot," which will allow the company to "introduce new products to the market faster."
I think we're going to see more vertical integration involving the major 3-D printing players buying materials developers and suppliers, as materials are just as key to the success of the 3-D printing companies as are their 3-D printing systems. Additionally, buying up these types of companies makes them unavailable to do work for the competition. In this particular case, Stratasys is buying only "select assets," and since no details were provided, it's impossible to say whether this buy precludes Interfacial from doing work for other 3-D printing companies.
Foolish final thoughts
Both 3D Systems and Stratasys announced earlier this year -- and then reiterated during their respective earnings releases last month -- that they'll be turbocharging their growth strategies in 2014. So, while four acquisitions between the two companies within one week might prove difficult to top, investors should expect acquisition, as well as teaming, activity to heat up.
3 stocks poised to be multi-baggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multi-bagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.