General Electric Company (NYSE:GE) recently purchased two 3D printing firms, Arcam AB NPV (OTCMKTS:AMAVF) of Sweden and SLM of Germany, for $1.4 billion. GE invested $1.5 billion in 3D printing technology since 2010, using it mainly in its GE Aviation subsidiary, which generated $24.7 billion in revenue in 2015. GE expects cost savings of $3 billion to $5 billion over the next 10 years as a result of the merger.
Purchasing a 3D printing firm might allow a manufacturer to exclude competitors from the technology, giving the buyer a competitive edge. Under GE’s ownership, Arcam can sell to other aerospace companies, but other buyers might make different arrangements.
Other users of 3D printing technology may now see the financial soundness of the purchase and follow suit. Indeed, analyst Rachel Gordon of IDTechEx thinks the move might spark a series of acquisitions in the industry, which could boost the prices of 3D printing stocks.
Which 3D printing stocks might be acquisition targets? Potential acquisition targets tend to exist in growing industries, with clean balance sheets and unique product offerings. 3D printing, or additive manufacturing, will affect many different industries, from aerospace, automotive, medical devices and construction. Many firms might benefit from the acquisition of a 3D printing firm.
With that in mind, here are three 3D printing stocks that are prime targets for a buyout.
3D Printing Stocks to Buy: ExOne Co (XONE)
ExOne Co (NASDAQ:XONE) makes 3D printers for the aerospace, automotive, heavy equipment and energy sectors. XONE machines print materials such as glass, ceramics and metals such as stainless steel. In its 2014 annual report, ExOne states that its “machines are used primarily to manufacture industrial products that are ordered in relatively low volumes, are highly complex and have a high value to the customer.”
The aerospace industry may be interested in buying 3D printing firms such as XONE, due to the low volume and high complexity involved in manufacturing aircraft engines. The Teal Group put aircraft engine sales at $500 billion over the next decade, so there will be a lot of demand for 3D printed metal components. Arcam CEO Magnus Rene estimates that aerospace will account for more metal powder sales than other industries such as orthopedics.
After GE’s purchase of Arcam and SLM, a competitor such as Pratt and Whitney, a subsidiary of United Technologies Corporation (NYSE:UTX), might make a move on XONE. The $234 million firm holds little debt, which might make it an attractive takeover target. Recently, short interest in XONE fell, which could be bullish for ExOne stock.
3D Printing Stocks to Buy: Voxeljet AG (ADR) (VJET)
Voxeljet AG (ADR) (NYSE:VJET) of Germany produces 3D printers for automotive, foundry, heavy equipment, aerospace and other industries. Voxeljet’s customers include Daimler AG (OTCMKTS:DDAIF), Volkswagen AG (ADR) (OTCMKTS:VLKAY) and Ford Motor Company (NYSE:F), among several other notable companies. In an SEC Form 20-F filed this year, Voxeljet stated that many of its customers have been buying from VJET for over a decade.
Automakers such as Daimler 3D print spare parts, while BMW (OTCMKTS:BMWYY) recently invested in 3D printing startup Carbon. Ford uses 3D printing to save millions of dollars on test parts and cut months off of development time.
A larger firm might buy VJET, which the market values at just $87 million. In 2013, 3D Systems Corporation (NYSE:DDD) sparked rumors that it would acquire VJET when it displayed Voxeljet printers on its website.
Like ExOne, Voxeljet also possesses a clean balance sheet. VJET also seems cheap, trading at 1.34 times book value.
3D Printing Stocks to Buy: Organovo Holdings Inc (ONVO)
San Diego-based Organovo Holdings Inc (NASDAQ:ONVO) prints 3D human liver and kidney tissue models. Organovo’s 3D human tissue holds the potential to revolutionize drug discovery and development. Clinical trials often fail due to toxicity, but ONVO’s tissue models could help predict this and save Big Pharma millions of dollars.
Pharmaceutical companies spend over $50 billion a year on research and development, and Organovo estimates the markets for liver and kidney toxicology testing at $1.3 billion and $2.1 billion, respectively. Further down the road, ONVO’s 3D printed tissue could be used for therapeutic implants.
Does Organovo meet the conditions of a takeover target? ONVO is at the center of an emerging industry, developing a potentially game-changing product. Organovo enjoys a clean balance sheet, with no debt or stock with super voting rights that could block an acquisition.
ONVO partners with academic institutions such as the Harvard Medical School, as well as Big Pharma, including Merck & Co., Inc. (NYSE:MRK), Bristol-Myers Squibb Co (NYSE:BMY) and United Therapeutics Corporation (NASDAQ:UTHR). L’Oreal SA (ADR) (OTCMKTS:LRLCY) also formed a partnership with ONVO to develop skin tissue to test cosmetics. These firms might acquire Organovo in the future in order to gain a competitive advantage in the industry.
The Motley Fool’s Brian Stoffel thinks Organovo could be bought out for $1 billion if the technology proves itself. Currently, the market values ONVO at just over $360 million.
As of this writing, Lucas Hahn did not hold a position in any of the aforementioned securities.