SCHEDULE 13D/A: Steel Connect Proposes $10.18 Per Share Cash Acquisition of DMC Global, Offering 28.7% Premium

Steel Connect LLC has submitted a revised non-binding proposal to acquire all outstanding shares of DMC Global Inc. it does not already own for $10.18 per share in cash, representing a significant premium.

Summary

• Steel Connect LLC proposes to acquire all outstanding shares of DMC Global Inc. (DMC) that it does not already own at a price of $10.18 per share in cash.
• The offer represents a 28.7% premium over DMC's closing price of $7.91 per share on February 6, 2025.
• It also represents a 29.4% premium over the average last 30-day closing price of $7.86 per share.
• The proposal is non-binding and contingent on satisfactory completion of due diligence, delivery of audited 2024 financial statements consistent with provided forecasts, and reaffirmation of 2025-2027 projections by DMC's management and board.
• Steel Connect LLC, a wholly owned subsidiary of Steel Partners Holdings L.P., currently beneficially owns 1,973,039 shares of DMC, representing 9.9% of the outstanding common stock.
• The valuation is based on 20,026,491 shares of DMC outstanding as of October 31, 2024.
• The all-cash proposal is not contingent on financing, with Steel planning to use cash on hand and availability under its current revolving credit facility.

Sentiment

Score: 8

Explanation: The sentiment is highly positive for DMC shareholders due to a significant premium cash offer. The non-binding nature and due diligence conditions introduce some uncertainty, but the overall tone from the acquirer is confident and committed to a swift transaction.

Positives

• The proposal offers a substantial premium of 28.7% over DMC's recent closing price and 29.4% over its 30-day average, providing immediate and significant value to shareholders.
• The offer is all-cash and not contingent on financing, reducing execution risk and providing certainty of funds.
• Steel Connect intends to keep DMC's operational management team and current employees in place, suggesting continuity and stability post-acquisition.
• Steel is prepared to proceed immediately and believes it can complete confirmatory diligence and execute definitive agreements swiftly, indicating a desire for an expeditious transaction.

Negatives

• The proposal is non-binding and subject to several conditions, including satisfactory due diligence and reaffirmation of financial projections, which could lead to its withdrawal or modification.
• Steel Connect has not yet received all requested access and information for due diligence, which could be a point of contention or delay the process.
• Steel Connect explicitly reserves the right to withdraw or modify the proposal at any time and for any reason.

Risks

• The transaction is contingent on the satisfactory completion of due diligence, which may be hindered if DMC does not provide the requisite cooperation and information.
• The proposal is conditional on DMC's 2024 audited financial statements being consistent with previously provided forecasts, and the reaffirmation of 2025-2027 projections by DMC's management and board.
• Customary regulatory competition filings are required, and while expected to be obtained in the ordinary course, there is a risk of additional requests for information or delays.
• DMC's board of directors may not approve the definitive agreement or may seek alternative proposals.

Future Outlook

Steel Connect anticipates being able to obtain customary regulatory approvals in the ordinary course and without additional requests for information. They are confident in their ability to complete confirmatory diligence, negotiate and execute definitive agreements, and consummate the transaction swiftly, provided they receive reasonable and customary access to the Company and its management.

Management Comments

• "Steel Connect LLC (together with its affiliates, Steel, we or our) is pleased to present this non-binding proposal to acquire all the outstanding shares of common stock of DMC Global Inc. (DMC or the Company) that we do not already own at a price equal to $10.18 per share in cash."
• "For stockholders, our proposal represents a 28.7% premium over todays closing price of $7.91 per share and a 29.4% premium over the average last 30-day closing price of $7.86 per share."
• "This all-cash proposal is not contingent on financing. Steel would use cash on hand and availability under its current revolving credit facility to acquire the Company."
• "We believe that keeping the operational management team intact is very important. In this case, we would expect to keep the operations management team and current employees in place to execute the Companys strategy."
• "We are confident, assuming reasonable and customary access to the Company, its management and certain other discrete information we have requested, that we would have the ability to complete our confirmatory diligence, concomitantly negotiate and execute definitive agreements and consummate the Transaction swiftly and with certainty."
• "We believe that our proposal represents the best opportunity for stockholders to achieve immediate liquidity and full and fair value for their shares."

Industry Context

This proposal reflects a potential consolidation within the diversified industrial products or specialized manufacturing sectors, where larger holding companies like Steel Partners Holdings L.P. seek to acquire companies to expand their portfolio or achieve synergies. The all-cash, non-contingent financing structure suggests a strong strategic interest and financial capacity from the acquirer, which is a common characteristic of well-capitalized strategic buyers in M&A.

Comparison to Industry Standards

• The document does not provide sufficient information to compare DMC Global Inc.'s specific operational results or financial performance against global industry benchmarks or specific comparable companies/projects. The focus is on the terms of the acquisition proposal rather than DMC's standalone performance relative to its peers.

Stakeholder Impact

• Shareholders: Potential for immediate liquidity and significant financial gain due to the substantial premium offered for their shares.
• Employees: Steel Connect expects to keep the operational management team and current employees in place, suggesting job stability and continuity for the workforce.
• Management: The operational management team is expected to remain in place, indicating a focus on maintaining existing operational expertise.

Next Steps

• DMC Global Inc. is requested to respond to the proposal by February 11, 2025.
• Steel Connect requires access to DMC's management teams (Arcadia and other segments) for confirmatory due diligence.
• Negotiation and execution of definitive agreements between Steel Connect and DMC.
• Submission of customary regulatory competition filings.
• Consummation of the transaction.

Key Dates

Recommendation

Keywords

DMC Global Inc., Steel Connect LLC, Steel Partners Holdings L.P., acquisition proposal, cash offer, premium, Schedule 13D/A, corporate takeover, M&A, shareholder value, due diligence, non-binding