Industry Consolidation: Nano Dimension to Purchase Desktop Metal

Nano Dimension is acquiring Desktop Metal!

The Israeli company issued a press release stating the following:

“Nano Dimension Ltd. and Desktop Metal, Inc. today jointly announced that they have entered into a definitive agreement under which Nano Dimension will acquire all outstanding shares of Desktop Metal in an all-cash transaction for $5.50 per share, subject to possible downward adjustments to $4.07 per share, as described below.”

The deal’s total value is approximately US$183M, which is a decent premium over Desktop Metal’s current valuation, which was in the US$140M range this past week. That premium is likely sufficient to persuade Desktop Metal shareholders to sign over their shares to Nano Dimension.

The deal is expected to close in the fourth quarter of this year, but there’s an interesting twist:

“If the closing of the transaction extends into 2025, Nano Dimension has committed to providing Desktop Metal with a $20 million secured loan facility. Desktop Metal does not expect to draw on the facility, but to the extent it does, there will be an adjustment to the purchase price based on the amount drawn prior to closing of up to $0.80 per share.”

This suggests that Desktop Metal may be running out of cash, and that Nano Dimension would be able to assist in the interim. That tells you all you need to know about why this deal took place, at least from Desktop Metal’s side.

But what about the other side? Why is Nano Dimension picking up Desktop Metal?

Last week I heard Nano Dimension CEO Yoav Stern repeatedly call for consolidation in the industry. His belief is that the struggles of many of the leading players is because there are simply too many of them. Consolidation, so the theory goes, could solve the problem by reducing expenses.

That theory, along with the fact that Nano Dimension among all the big players has a rather large nearly US$1B cash reserve, has seen them on the hunt for other companies to acquire for more than a year.

Nano Dimension spent considerable time attempting to acquire Stratasys with repeated offers and counter offers. All of them were rejected by Stratasys. Stratasys’ size was just about the maximum affordable with use of Nano Dimension’s cash reserves, and they were not able to close the deal. Unsurprisingly, Nano Dimension then turned to smaller players for acquisition targets.

And it’s a good time to do so: the valuations of companies are all dramatically down from prior levels, some down even 90% of their peak valuations. In fact, if Nano Dimension wanted to purchase the majority of the publicly-traded 3D print companies smaller than their size, they certainly could. It’s quite possible that Nano Dimension may add more to their portfolio in coming months.

Desktop Metal had previously struck a deal to merge with Stratasys, however it was rejected by a majority of Stratasys shareholders. Desktop Metal was then left to organize a new forward strategy, and it seems that a sale to Nano Dimension was the winning entry.

The acquisition will provide Nano Dimension with a considerable portfolio of unique 3D printing technologies, as both they and Desktop Metal had been acquiring other companies. The technology portfolio will include a wide variety of prototyping and production methods in many materials. We’ll investigate this aspect further in a future post.

The acquisition will presumably leapfrog Nano Dimension over Stratasys in our weekly valuation leaderboard. Up to now Stratasys has firmly been in the lead among these three companies. However, much of Nano Dimension’s valuation has been grounded on their huge cash reserve, which is now lower than before. It should be interesting to see how investors value the company after the acquisition.

Last week I bumped into Desktop Metal CEO and co-founder Ric Fulop at Rapid+TCT, and while our meeting was brief, he obviously didn’t mention anything about the acquisition.

He did, however, seem quite cheerful.

Via Nano Dimension and Desktop Metal