Struggling 3D Printing Pioneer Stratasys To Buy Startup Origin For $100 Million As Competition In The Industrial Space Heats Up

Publicly traded 3D printing pioneer Stratasys
SSYS
has agreed to buy 3D printing startup Origin in a $100 million cash-and-stock deal, the company announced this morning.

The deal will combine Stratasys’s operations in polymer 3D printing with Origin’s resin-based technology for mass-produced parts. Stratasys, which has struggled with slumping sales and rising losses, expects that Origin’s proprietary Programmable PhotoPolymerization technology, known as P3, will add up to $200 million in incremental annual revenue within five years. 

The purchase price includes $60 million paid at closing, and an additional $40 million based on hitting performance hurdles over the next three years. The acquisition is expected to close in January 2021.

Stratasys is one of the pioneers of 3D printing. Scott Crump founded the business after he invented the technology known as Fused Deposition Modeling, or FDM, back in 1989. Crump took the company public in 1994, and remained CEO until its merger with Objet in 2012. He has announced his intention to retire from the firm at the end of 2020.

But Stratasys, which has a market cap of $971 million, has seen its revenue slide and its losses grow recently, a trend that accelerated after the Covid-19 pandemic hit earlier this year. It reported sales of $636 million with a net loss of $11 million in 2019. But for the first three quarters of 2020 (ended September 30), its losses ballooned to $455 million on revenue of $241 million.

Its current CEO, Yoav Zeif, who has an MBA from Northwestern’s
NWE
Kellogg School of Management and worked as a partner at McKinsey, took over the top spot in February.

Origin, on the other hand, is one of the crop of newer 3D printing innovators. Founded by Chris Prucha, a former software engineer at Apple
AAPL
who also cofounded Notion (but left before its recent success), the San Francisco-based firm launched in 2015. Origin’s first manufacturing-grade printer, known as Origin One, precisely controls heat, light and force to enable customers to build parts with a wide variety of durable resins. Origin was one of a number of 3D printing companies that stepped up during the Covid-19 pandemic to produce nasopharyngeal test swabs and protective face shields.

With the deal, Origin hopes to expand its market reach by pushing into industries and countries where Stratasys already has a presence. Stratasys said that it expected the acquisition to fortify its position in industries that include dental, medical, tooling, defense and consumer goods. Prucha and cofounder Joel Ong, the company’s chief technology officer who was previously a software engineer at Google, will join Stratasys and continue to lead the development of the Origin technology.

Industrial uses of 3D printing have been growing rapidly as large manufacturers and startups alike have discovered that they can more efficiently design parts that could not be produced in more traditional ways. In one sign of 3D printing’s coming of age within the $13 trillion global manufacturing market, Desktop Metal is going public in a SPAC deal. Its shares are expected to begin trading on the New York Stock Exchange on Thursday.

Stratasys said that its internal market analysis showed that manufacturing applications for 3D printing could reach some $25 billion by 2025 with resin polymer-based systems growing at a 20% annual rate until then.

This story will be updated.