A Metal 3D Printing Leader Emerges: Desktop Metal to Buy ExOne

Desktop Metal (NYSE: DM) and ExOne (Nasdaq: XONE) have announced that the former will buy all shares of common stock of the latter, establishing a leader in the metal binder jetting space and narrowing the competition in an already very small space. The deal will see ExOne shareholders receive $8.50 in cash and $17.00 in shares of DM stock, making for $25.50 per share for ExOne shareholders and totaling $575 million for the transaction.

Since Desktop Metal began making waves in the 3D printing industry, attention has been firmly focused on the bound metal printing space. Not only was this Boston startup aiming to introduce a rapid throughput form of metal binder jetting to the market, but 2D printing giant HP was also in the midst of launching Metal Jet, its own binder jetting technology. Meanwhile, Digital Metal began selling its binder jet technology in the form of a system, rather than as just a service. All of this was probably more than unsettling for ExOne, which pioneered metal binder jetting circa 1998.

These binder jetting developments was concurrent with a flurry of other activity in the bound metal printing space. Desktop Metal, for instance, had its Studio system, capable of extruding low-cost metal parts in an office friendly environment in a way that competed directly with Markforged’s Metal X system. Later on, ExOne worked out a deal with Rapidia to offer its own office-friendly metal extrusion 3D printer.

All of this is meant to reduce the cost of metal 3D printing and, in the case of binder jetting, increase the throughput of the technology, as well. While we still have to see how the market continues to shape up, this is a significant move by Desktop Metal. By acquiring ExOne, it gains decades of experience in binder jetting, a slew of materials, and numerous customers. The latest customer is Ford, which just announced the use of ExOne’s technology for end part production of automotive parts.

In the same way that the purchase of EnvisionTEC infused the young Desktop Metal with instant cash, ExOne will provide DM with an instant collection of revenue streams from sand cores and molds to metal parts. Whereas Desktop Metal previously had to justify their multi-billion market cap, as a firm that had only recently begun putting machines on the market, it will now have to justify their capital expenditures.

“We are thrilled to bring ExOne into the DM family to create the leading additive manufacturing portfolio for mass production,” said Ric Fulop, Founder and CEO of Desktop Metal. “We believe this acquisition will provide customers with more choice as we leverage our complementary technologies and go-to-market efforts to drive continued growth. This transaction is a big step in delivering on our vision of accelerating the adoption of additive manufacturing 2.0.”

“We are excited to join forces with Desktop Metal to deliver a more sustainable future through our shared vision of additive manufacturing at high production volumes,” said John Hartner, CEO of ExOne. “We believe our complementary platforms will better serve customers, accelerate adoption of green technologies, and drive increased shareholder value. Most importantly, our technologies will help drive important innovations at meaningful production volumes that can improve the world.”

The exact financial details of the deal are dependent on a collar mechanism that is described as follows:

“The share consideration component is subject to an exchange ratio adjustment if Desktop Metal’s 20-day volume weighted average price (VWAP) 3 days prior to closing is between $7.94 and $9.70. If the 20-day VWAP exceeds the higher end of that range, the exchange ratio will be fixed at 1.7522 per share, and if the 20-day VWAP goes below the lower end of that range, the exchange ratio will be fixed at 2.1416 per share. The final number of Desktop Metal shares estimated to be issued on a fully diluted basis will range between approximately 39.5 million and 48.3 million shares at closing. Upon closing of the transaction, current Desktop Metal shareholders will own between 85 and 88% and current ExOne shareholders are expected to own between 12 and 15% of the combined company, respectively.”

ExOne’s Chairman of the Board of Directors and the largest shareholder, Kent Rockwell, has entered into a support agreement to vote his 4.2 million shares in favor of the deal, which has already been approved by the Board at ExOne. The transaction is expected to close by Q4 of 2021, once it passes all of the standard hurdles. On the Desktop Metal side, Credit Suisse Securities (USA) is the exclusive financial advisor and Latham & Watkins represents as the legal advisor. For ExOne, Stifel is the exclusive financial advisor and McGuireWoods LLP is the legal advisor.

Desktop Metal is clearly attempting to become a 3D printing giant and, with its impressive roll-up, it’s starting to look like one. The purchase of a wood 3D printing firm even gives it sustainability appeal. It doesn’t take a marketing expert to know that their image echoes that of Apple, the user-friendly tech leader. As the user-friendly figure in additive manufacturing, will Desktop Metal truly become the Apple of 3D printing?