What happened

Last week, investors applauded 3D printer maker Stratasys' (SSYS -2.24%) announcement of an apparently impressive quarter in which the company seemed to earn a $0.02 per share profit, when investors had expected a loss (which indeed happened).

A few days ago, I explained why investors who bid up Stratasys stock 10% on the news were making a mistake, and why Stratasys' business isn't going as great as it appears. And now it seems that its management agrees with me -- because it has decided to buy an entirely different business: Desktop Metal (DM 0.84%).

As of 10:50 a.m. ET today, Stratasys stock is up 0.5%, and Desktop Metal is up 2.9%.  

So what

The news broke this morning. In a $1.8 billion, all-stock transaction, Stratasys wants to merge with rival 3D printer maker Desktop Metal.

Stratasys described the merger as a strategic decision to combine "the polymer strengths of Stratasys with the complementary industrial mass-production leadership of Desktop Metal's brands," creating a new company generating $1.1 billion in sales in 2025, and growing to dominate "a total addressable market of more than $100 billion by 2032."

All of which sounds perfectly reasonable. But at the same time as Stratasys has decided to buy Desktop Metal, Stratasys itself is being pursued in a hostile takeover bid by Nano Dimension (NNDM -4.10%), which already owns 14% of Stratasys' stock, and is offering $18 a share to raise its stake to somewhere between 53% and 55%.  

Now what

Stratasys' board says it will review Nano Dimension's offer, but the fact that it is simultaneously trying to merge with Desktop Metal gives you a pretty good idea of which way that decision is going to go.

Instead, Stratasys clearly prefers to buy Desktop Metal for 0.123 share of Stratasys for each share of Desktop Metal, giving Stratasys shareholders control of the combined company.

The Desktop Metal bid values Stratasys stock at about $15.26 per share -- below Nano Dimension's offer. But the fact that Stratasys would gain control of another company, rather than losing control to Nano Dimension, gives Stratasys management at least an argument that its plan is the better one for shareholders.

While nothing is final at this point, Stratasys hopes to close its merger with Desktop Metal in the fourth quarter. Stay tuned.