DEFA14A: Nano Dimension to Acquire Desktop Metal in $183 Million Deal, Creating Additive Manufacturing Powerhouse

Nano Dimension and Desktop Metal announced a definitive agreement for Nano Dimension to acquire Desktop Metal for $183 million, aiming to create a leading, well-capitalized company in the additive manufacturing industry.

Summary

• Nano Dimension is set to acquire Desktop Metal for $5.50 per share in cash, valuing the deal at approximately $183 million.
• The acquisition aims to create a leader in the additive manufacturing space with a combined revenue of $246 million (based on 2023 pro forma figures) and substantial cash reserves of around $680 million.
• The combined company will leverage complementary technologies, including Desktop Metal's binder jetting and Nano Dimension's inkjet electronics and microfabrication capabilities.
• Synergies are expected in go-to-market strategies and customer bases, focusing on converting top-line growth into bottom-line profitability.
• The transaction is anticipated to close by the end of the year, subject to regulatory approvals and Desktop Metal stockholder approval.
• The combined entity will have a global presence, allowing for consolidation of facilities and reduction of overhead costs.
• The company expects negative cash flow for the next six to eight quarters but anticipates improvement through revenue synergies and cost reductions.
• Management teams from both companies will be integrated, with Yoav Stern as CEO of the combined entity and Ric Fulop joining the C-suite and board.
• Nano Dimension holds a strategic investment in Stratasys and maintains a friendly relationship with its management, exploring potential cooperation.
• The acquisition price may be adjusted downwards based on Desktop Metal's transaction expenses and potential utilization of a working capital loan from Nano Dimension.

Sentiment

Score: 7

Explanation: The document expresses optimism about the acquisition's potential to create a leading company in the additive manufacturing industry. While acknowledging challenges such as negative cash flow in the short term, the overall tone is positive due to the expected synergies, cost reductions, and growth opportunities.

Positives

• The acquisition creates a well-capitalized leader in the additive manufacturing industry.
• The combined company has complementary technologies with zero overlap in product portfolios.
• There are significant cross-selling opportunities between the two companies' customer bases.
• The combined company has a strong global presence, allowing for cost savings through facility consolidation.
• The management teams from both companies will be integrated, bringing together expertise and experience.
• Nano Dimension has a strategic investment in Stratasys, fostering potential cooperation within the industry.
• The combined company has a strong patent portfolio with over 1,000 patents covering various additive manufacturing technologies.
• Nano Dimension achieved significant double-digit organic growth last year, indicating strong business management.
• The acquisition provides Desktop Metal with access to Nano Dimension's strong balance sheet and cash reserves.
• The combined company will have a significant installed base of printers, providing a large customer base for cross-selling.

Negatives

• The acquisition price may be adjusted downwards based on Desktop Metal's transaction expenses and potential utilization of a working capital loan from Nano Dimension.
• The combined company expects negative cash flow for the next six to eight quarters.
• The transaction is subject to regulatory approvals and Desktop Metal stockholder approval, which could delay or prevent the closing.
• Integrating the two companies and achieving the expected synergies will take time and effort.
• There may be some employee nervousness due to the merger, requiring careful management of the integration process.
• Desktop Metal has had to cut expenses in sales and marketing due to industry conditions, which may need to be rebuilt.
• The combined company will need to manage the integration of different management styles and corporate cultures.
• The company will need to address the convertible bonds outstanding in Desktop Metal.
• The company will need to navigate potential pushback from shareholders regarding the acquisition.

Risks

• The ultimate outcome of the proposed transaction between Desktop Metal and Nano is uncertain, including the possibility that Desktop Metal's stockholders will reject the proposed transaction.
• The announcement of the proposed transaction could negatively affect Desktop Metal's ability to operate its business and retain key personnel.
• The timing of the proposed transaction is uncertain and could be delayed.
• The occurrence of any event, change, or other circumstance could give rise to the termination of the proposed transaction.
• The ability to satisfy closing conditions to the completion of the proposed transaction is not guaranteed.
• There are risks related to the completion of the proposed transaction and actions related thereto.
• The company faces risks described in Nano's and Desktop Metal's filings with the SEC, including risks related to their respective businesses and industries.

Future Outlook

The combined company aims to convert top-line growth into bottom-line profitability within the next two years, leveraging synergies and cost reductions. They anticipate a negative cash flow for the next six to eight quarters but expect improvement through revenue synergies and cost reductions. The company plans to continue to consolidate the additive manufacturing industry through further acquisitions.

Management Comments

• Yoav Stern: 'We are very excited today. It's a very exciting event.'
• Yoav Stern: 'We are not going to use this cash just to grow. We are going to use this cash to improve and deliver dollars to the bottom line.'
• Ric Fulop: 'This is a seminal transaction that's going to mark the move for a lot of new activity that will happen over the next two years.'
• Ric Fulop: 'This is forming one of the largest companies in our market, well over 1,000 patents.'
• Yoav Stern: 'This change for our employees is a change for the better. We are not a company in the past that we buy and we tap costs in order to deliver. That's not our--this is not a rollup. We buy and build, B&B.'

Industry Context

This acquisition reflects a trend towards consolidation in the additive manufacturing industry, where many companies are not yet profitable. The combined entity aims to be a leader in the industry, well-capitalized and positioned for growth in the mass production of additive manufacturing components. The deal is seen as a landmark transaction that could spur further consolidation in the sector.

Comparison to Industry Standards

• The document mentions that many companies in the additive manufacturing industry are not yet profitable, highlighting the need for consolidation and improved business models.
• The combined company's revenue of $246 million and cash reserves of $680 million position it as one of the largest and best-capitalized players in the industry.
• The document notes that Nano Dimension achieved significant double-digit organic growth last year, outperforming other publicly traded companies in the space.
• The company's focus on mass production applications differentiates it from competitors focused on prototyping and tooling.
• The document compares the consolidation in the additive manufacturing industry to the consolidation that occurred in the airline industry, where the number of aircraft manufacturers decreased significantly.

Management Changes

Stakeholder Impact

• Shareholders of Desktop Metal will receive $5.50 per share in cash.
• Employees of both companies may experience some nervousness due to the merger, but the company aims to create a positive environment.
• Customers of both companies will benefit from a broader range of products and services.
• Suppliers of both companies may see changes in their relationships as the combined company consolidates its supply chain.
• Creditors of Desktop Metal will need to be addressed, particularly regarding the convertible bonds.

Next Steps

• Obtain regulatory approvals, including CFIUS and HSR.
• Secure Desktop Metal stockholder approval.
• Integrate the management teams and operations of the two companies.
• Develop a detailed plan for delivering dollars from the top line to the bottom line.
• Continue to explore potential cooperation with Stratasys.
• Address the convertible bonds outstanding in Desktop Metal.

Key Dates

Keywords

acquisition, additive manufacturing, Desktop Metal, Nano Dimension, merger, 3D printing, synergies, cash, revenue, binder jetting, inkjet electronics