Massachusetts-based industrial 3D printer manufacturer Desktop Metal has filed a lawsuit against Nano Dimension, alleging that the Israeli firm has failed to make “reasonable best efforts” to secure timely regulatory approval for their merger.
Filed in the Delaware Court of Chancery, Desktop Metal is requesting specific performance from Nano Dimension, including cooperation with the Committee on Foreign Investment in the United States (CFIUS) to finalize a mitigation agreement and complete the transaction within five business days of receiving approval.
In addition, Desktop Metal seeks a Court declaration that Nano Dimension has not met its contractual obligations and requests injunctive relief to prevent any actions that might hinder the merger’s completion. An expedited hearing is scheduled for December 30, 2024, aiming to hold a trial in January.
With all other regulatory conditions met, CFIUS approval remains the final hurdle to closing the deal. Desktop Metal has reaffirmed its commitment to upholding its contractual obligations and expressed confidence in the timely completion of the transaction, provided Nano Dimension fulfills its responsibilities under the agreement.
Responding to the lawsuit, Nano Dimension has described it as “without merit” and “inconsistent with the terms of the Merger Agreement.” According to Nano Dimension, Desktop Metal’s claims attempt to impose deadlines and obligations beyond what the agreement stipulates.
Adding to that, the Israeli firm has emphasized its commitment to working through the CFIUS review process and stated its intention to vigorously defend its rights under the agreement.
Events leading up to the lawsuit
The legal dispute comes amid a complex series of developments that have unfolded since the merger plan was announced in July 2024. At the time, Nano Dimension unveiled plans to acquire Desktop Metal in an all-cash deal valued at approximately $183 million, offering a 27.3% premium on Desktop Metal’s stock price, gaining board approval from both companies.
Shortly after, Nano Dimension CEO Yoav Stern described the deal as transformative, likening it to acquiring a renovated property at a reduced price. He emphasized its potential to create a 3D printing “juggernaut” while also addressing Nano Dimension’s 15% stake in Stratasys, calling it a “strategic investment.”
Stern hinted at possible collaborations, referencing Stratasys’ past interest in merging with Desktop Metal, although it was ultimately terminated. However, the Israeli manufacturer’s own constant bids to acquire Stratasys weren’t fruitful, reflecting broader challenges in its consolidation strategy.
For Nano Dimension, the Desktop Metal transaction marks a step toward creating a global leader in additive manufacturing, combining complementary technologies to drive growth. Both Fulop and Stern highlighted their commitment to scaling 3D printing from prototyping to mass production, emphasizing the merger’s potential to transform the industry.
Shareholder discontent and financial challenges
Although the deal was framed as a transformative step, the Nano Dimension-Desktop Metal merger sparked mixed reactions among shareholders. Some Desktop Metal investors expressed dissatisfaction with the terms, citing the company’s significant valuation decline in recent years.
Once trading at over $20 per share, Desktop Metal’s stock dropped to historic lows trading marginally above $4.30 per share by mid-2024, raising concerns about the fairness of the acquisition price.
As these concerns unfolded, Desktop Metal’s financial struggles became more apparent. In Q2 2024, the company reported a 26.9% year-over-year revenue decline to $38.9 million, alongside a growing operating loss of $101.3 million.
During the investor call, Fulop described the merger as essential for the company’s survival, warning that failure to complete the transaction could lead to a “fatal prognosis” for Desktop Metal. The company’s financial challenges, driven by slowing capital expenditures and rising interest rates, underscored the urgency of the proposed merger.
Despite pockets of shareholder discontent, Desktop Metal’s stockholders approved the transaction, with over 96% of votes cast in favor. This approval marked a significant milestone, but the merger still required regulatory clearance, including approval from CFIUS.
Meanwhile, Nano Dimension pursued another acquisition, announcing plans to acquire Markforged for $115 million in an all-cash deal. The successful acquisitions of Desktop Metal and Markforged aimed to solidify Nano Dimension’s position in the AM sector. Together, the deals were said to generate a combined annual revenue of $340 million based on FY 2023 figures.
Leadership turmoil and mounting pressures
Alongside these consolidation efforts, Nano Dimension is facing internal challenges driven by activist shareholder Murchinson. Critical of Nano Dimension’s acquisition strategy and governance, the investment firm initiated a campaign in early 2023 to overhaul the company’s Board of Directors. One possible explanation for the attention Nano Dimension has received from activist investors is the substantial cash balance it had accumulated prior to embarking on an M&A spree.
After months of disputes and legal battles, Murchinson succeeded in removing Yoav Stern from the Board earlier this month, though Stern continues to serve as CEO. During Nano Dimension’s 2024 Annual General Meeting of Shareholders (AGM), Murchinson described the Desktop Metal and Markforged deal as “overpriced” and “misguided,” further straining the merger plans.
This development has raised questions about the stability of Nano Dimension’s leadership and Stern’s ability to effectively execute the company’s M&A strategy amid growing internal and external pressures.
As the lawsuit moves forward, the future of the merger remains uncertain. Desktop Metal contends that Nano Dimension has failed to meet its contractual obligations, while Nano Dimension claims it is adhering to the terms of the agreement.
If successful, the merger would create a combined entity with significant resources, including over 1,000 patents and an installed base of 8,000 3D printers, positioning it as a key player in the additive manufacturing industry.
The court’s decision will play a pivotal role in determining the future of this contentious transaction and the strategic trajectory of the companies.
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Featured image shows Nano Dimension 3D printed electronics. Photo by Michael Petch.
