Israeli electronics 3D printer manufacturer Nano Dimension is set to acquire Massachusetts-based industrial 3D printer manufacturer Desktop Metal in an all-cash transaction for approximately $183 million, or $5.50 per share.
The deal will see the creation of what Nano Dimension CEO Yoav Stern is calling a “larger, more diversified global innovative company.” This will reportedly drive customer support and generate “long-term value creation for shareholders,” to achieve “profitable growth.”
During a call with investors, Stern revealed he will serve as CEO of the new company, with Desktop Metal CEO Ric Fulop to join the C-suite and board of directors.
The transaction represents a 27.3% premium on Desktop Metal’s closing price and a 20.5% premium to the 30-day VWAP as of July 2, 2024. The transaction may see possible downward adjustments to $4.07 per share, or as little as $135 million in total.
The deal is subject to closing conditions, including the approval of Desktop Metal’s stockholders, regulatory approvals, and certain termination rights. Having already been approved by each companies board, the deal is expected to close in Q4 2024. Stern stated, “We will work like dogs to finish the transaction as soon as possible.”
The new combined company will reportedly offer a strong financial profile, with joint FY’23 revenue of $246M, 28% of which is recurring revenue. Both Nano Dimension and Desktop Metal claim the new venture seeks to reach profitability and “capitalize on growth potential” by scaling 3D printing to mass manufacturing applications.
Yoav Stern, Nano Dimension CEO, commented, “Our combination with Desktop Metal is another step in Nano Dimension’s evolution to become the leader in digital manufacturing, with capabilities in mass manufacturing for critical industrial applications. We’re excited to join forces with an excellent group of technology leaders, all of whom share our vision for transforming manufacturing to Digital Industry 4.0.”
Stern stated that Nano Dimension is looking forward to working with Ric Fulop and the Desktop Metal team to “drive value for all our stakeholders.”
Fulop added “We’re excited to bring together our pioneering, complementary product portfolios that will further enhance our ability to serve our customers in high-growth industries with a more complete offering of digital manufacturing technologies for metal, electronics, casting, polymer, micro-polymer and ceramics applications. We look forward to working with Nano Dimension to join two great companies and their devoted teams that can serve our stakeholders to the maximum extent possible.”
Shareholder anger, and deal completion prospects
Desktop Metal shareholders who acquired a position at prices above today’s offer have expressed discontent with the terms of the deal. Taking to social media, several more vocal shareholders have stated opposition not only to the proposed price offered by Nano Dimension but also to the fact that the price may be lowered due to the near-inevitable transaction costs.
Desktop Metal is trading at a historic low, marginally above the $4.30 mark. Therefore, shareholders who bought in at any time will be taking a loss. The amount of that loss depends on when they got on board. Last year, shares briefly rose above $20. However, back in February 2021 the company stock price was $312. The company should not expect goodwill from these investors.
At least one silver lining is possible. Mergers and acquisitions do not always run smoothly. Nano Dimension itself has a history of disrupted takeover bids, and if another company decides to bid for Desktop Metal, the price could, in theory, rise.
In 2023, Nano Dimension was not only the target of activist investors seeking to replace the board, but also set out to acquire Stratasys. While the corporate machinations had been underway for much longer, January 2021, according to some sources, the battle went public in Q1 2023. Nano Dimension’s takeover plans for Stratasys were waged alongside a bid by 3D Systems to also buy Stratasys.
From January 2021, Stratasys and Desktop Metal had discussed a business combination, with Desktop Metal making a $60.00 per share offer for Stratasys in February of the same year.
It is yet to be written whether a similar battle for Desktop Metal will take place this summer. Shareholders may certainly hope for this to be the case, with subsequent offers bidding up the price. Whether Desktop Metal and Nano Dimension can break free from this apparent cage of fruitless M&A is yet to be seen.
Nano Dimension acquires Desktop Metal
Nano Dimension will acquire all outstanding shares of Desktop Metal. The purchase price may decrease by approximately $0.44 per share in cash based on Desktop Metal’s transaction expenses of approximately $11 million. The maximum reduction, based on expenses, could reach $0.63 per share.
Nano Dimension has committed to providing Desktop Metal with a $20 million secured loan facility, should the transaction extend into 2025. Desktop Metal has expressed that it does not expect to draw on this loan. However, if it does, there will be an adjustment to the purchase price of up to $0.80 per share. This will be based on the amount drawn prior to the acquisition closing.
The transaction is not subject to a financing condition, with Nano Dimension set to fund the acquisition using its cash on hand. According to both companies, the joint venture is expected to possess a strong cash position of approximately $665 million at the $5.50 per share price. The reduced $4.07 per share price deal would result in a $680 million cash position at closing.
Stern provided clarity on Desktop Metal’s $115 million outstanding convertible bonds, which stand at $0.60 per bond. He confirmed that these bonds can either be paid in full now or in 2026 as initially planned.
A new 3D printing industry leader?
By acquiring Desktop Metal, Nano Dimension claims it will create a new global additive manufacturing firm poised to compete in the industrial 3D printing market.
During the investor call, Fulop characterized the new firm as “one of the most formidable companies in our space.” He pointed to over 1,000 combined patents encompassing 3D printing electronics, investment casting, sand casting, ceramics, AI, and simulation. He claims that the new company will be the “Best capitalised in the industry with excellent potential,” and a “very formidable juggernaut with a bright future,”
Both companies argue the new venture will drive a transition from prototyping to end-use, “mass production.” It will reportedly be the first additive manufacturing provider to cover all customer needs spanning from prototyping to industrial medical and electronics applications, with Fulop highlighting there is zero overlap between their respective product portfolios.
The combined portfolio sees an installed base of over 8,000 3D printers. It is hoped that the new company will expand and cross-sell to existing customers of Nano Dimension and Desktop Metal, respectively.
It will also work to grow its overall customer base via customer acquisition and joint go-to-market strategies in automotive, aerospace, defense, industrial, medical and R&D/academia industries. The combined Customer base includes Amazon, Caterpillar, Fraunhofer Institute, NASA, Raytheon, REHAU, Tesla, Thermo Fisher Scientific, Toyota, and the US Army.
During the investor call, Stern hinted that the company will pursue additional mergers and acquisitions in the future. 3D printer manufacturer Stratasys attempted to merge with Desktop Metal last year in a deal opposed by 78.6% of shareholders. Now M&A negotiations could be back on the table, according to Stern.
Nano Dimension already owns 15% of Stratasys shares, in what Stern calls a “strategic investment.” He told investors his relationship with the Stratasys board is much more amicable than a year ago, and that they can “use their imagination” on where that relationship is heading.
Both Stern and Fulop are confident about a path to profitability, set to be supported by the strong financial position and cash reserves of both companies. Stern outlined the possibility for further consolidation and streamlining office, R&D and manufacturing facilities, which he expects to deliver notable cost savings.
The prospect of this geographic consolidation has Stern’s “blood boiling with excitement.” However, he emphasises there are currently no plans to reduce the combined employee headcount of around 1,300 people, stating “This is not a roll-up.”
Looking to the future, Stern outlined a roadmap for achieving profitability and “converting top line to bottom line.” However, he conceded that this will take time, predicting 6-8 quarters of negative cash flow.
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Featured image shows the Nano Dimension offices in Munich. Photo by Michael Petch.
