Item 8.01 Other Events. Background As previously disclosed, onAugust 11, 2021 ,The ExOne Company ("ExOne" or the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement"), by and among Desktop Metal, Inc., aDelaware corporation ("Desktop Metal"),Texas Merger Sub I, Inc. , aDelaware corporation and a wholly owned subsidiary of Desktop Metal ("Merger Sub I"),Texas Merger Sub II, LLC , aDelaware limited liability company and a wholly owned subsidiary of Desktop Metal ("Merger Sub II"), andExOne . The Merger Agreement provides, among other things, that upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub I will merge with and intoExOne , withExOne surviving the merger as a wholly owned subsidiary of Desktop Metal (the "First Merger"). The Merger Agreement also provides that, immediately following the effective time of the First Merger,ExOne , as the surviving corporation of the First Merger, will merge with and into Merger Sub II (the "Second Merger," and together with the First Merger, the "Mergers"), with Merger Sub II surviving the Second Merger and continuing as a wholly owned subsidiary of Desktop Metal. The proposed Mergers are described in the Proxy Statement/Prospectus, datedOctober 8, 2021 , filed with theSecurities and Exchange Commission (the "SEC") and mailed to all stockholders of record ofExOne in connection with the Mergers (the "Proxy Statement/Prospectus").
Regulatory Matters
OnOctober 20, 2021 ,ExOne and Desktop Metal received clearance from theGerman Federal Ministry for Economic Affairs and Energy , a foreign investment regulatory authority, that the transactions contemplated by the Merger Agreement have been cleared pursuant to section 58a paragraph 1 of the German Foreign Trade and Payments Ordinance. Additionally, and as previously reported, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired onOctober 28, 2021 at11:59 p.m. Eastern Time . Accordingly,ExOne and Desktop Metal have now received all regulatory approvals required as a condition to consummate the Mergers. Subject to obtainingExOne stockholder approval and the satisfaction of other customary closing conditions to the Mergers,ExOne and Desktop Metal expect to complete the Mergers during the fourth quarter of 2021, and, subject to the terms of the Merger Agreement, such closing may occur as soon as three days following the date of the special meeting ofExOne stockholders.
Litigation Update
As previously disclosed in the Proxy Statement/Prospectus, seven purportedExOne stockholders filed lawsuits againstExOne , its board of directors, and Desktop Metal related to the Mergers, one of which was subsequently withdrawn: Stein v.The ExOne Company , et. al, Case No. 1:21-cv-07756, filed in theUnited States District Court for the Southern District of New York onSeptember 16, 2021 (the "Stein Complaint"); Kong v.The ExOne Company , et al., Case No. 2:21-cv-04165, filed in theUnited States District Court for the Eastern District of Pennsylvania onSeptember 21, 2021 (the "Kong Complaint"); Vasedevan v.The ExOne Company , et. al, Case No. 1:21-cv-07984, filed in theUnited States District Court for the Southern District of New York onSeptember 24, 2021 (the "Vasedevan Complaint"); Goldstein v.The ExOne Company , et al., Case No. 21-cv-05358, filed in theUnited States District Court for the Eastern District of New York onSeptember 27, 2021 and subsequently voluntarily dismissed onOctober 14, 2021 (the "Goldstein Complaint"); Abramova v.The ExOne Company , et. al, Case No. 1:21-cv-08091, filed in theUnited States District Court for the Southern District of New York onSeptember 29, 2021 (the "Abramova Complaint"); Campanella v.The ExOne Company , et. al, Case No. 2:21-cv-01302, filed in theUnited States District Court for the Western District of Pennsylvania onSeptember 29, 2021 (the "Campanella Complaint"); McDevitt v.The ExOne Company , et. al, Case No. 1:21-cv-08249, filed in theUnited States District Court for the Southern District of New York onOctober 6, 2021 (the "McDevitt Complaint"). Following the filing of the Proxy Statement/Prospectus, five additional purportedExOne stockholders filed lawsuits against the various parties: Fruster v.The ExOne Company , et. al, Case No. 1:21-cv-05753, filed in theUnited States District Court for the Eastern District of New York onOctober 14, 2021 (the "Fruster Complaint"); Jones v.The ExOne Company , et. al., Case No. 1:21-cv-01474, filed in theUnited States District Court for the District of Delaware onOctober 20, 2021 (the "Jones Complaint"); Justice v.The ExOne Company , et. al. Case No. 2:21-cv-04607, filed in theUnited States District Court for the Eastern District of Pennsylvania onOctober 20, 2021 (the "Justice Complaint"); Coffman v.The ExOne Company , et. al., Case No. 1:21-CV-08648, filed in theUnited States District Court for the Southern District of New York onOctober 21, 2021 (the "Coffman Complaint"); Vasudevan v.The ExOne Company , et. al., Case No. 1:21-cv-08679, filed in theUnited States District Court for the Southern District of New York onOctober 22, 2021 (the "Vasudevan Complaint"). -------------------------------------------------------------------------------- Each of the complaints name as defendantsExOne and the members of its board of directors. The Kong and Abramova Complaints also name Desktop Metal, Merger Sub I and Merger Sub II as defendants. The complaints generally allege that the Proxy Statement/Prospectus was materially incomplete and misleading in violation of Sections 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9 promulgated thereunder. Each of the complaints seek, among other things, (i) injunctive relief preventing the consummation of the proposed transaction, (ii) damages and (iii) plaintiffs' attorneys' and experts' fees and expenses.ExOne and Desktop Metal believe that the allegations in the complaints are without merit and specifically deny that any further supplemental disclosure is required under applicable law; however, to avoid the burden and expense of further litigation and to avoid the risk that the complaints may delay or otherwise adversely affect the consummation of the Mergers,ExOne wishes to voluntarily make the supplemental disclosures related to the proposed Mergers as set forth below.
Supplements to the Joint Proxy Statement/Prospectus
The following materials supplement the statements contained in the Proxy Statement/Prospectus and should be read in conjunction with the Proxy Statement/Prospectus and the documents incorporated therein in their entirety. To the extent the information set forth herein differs from or updates information contained in the Proxy Statement/Prospectus, the information set forth herein shall supersede or supplement the information in the Proxy Statement/Prospectus. Nothing in this Current Report shall be deemed an admission of the legal necessity or materiality of the disclosures set forth herein, either separately or taken together. All page references are to pages in the Proxy Statement/Prospectus, and terms used below, unless otherwise defined, have the meanings set forth in the Proxy Statement/Prospectus.
The section of the Proxy Statement/Prospectus titled "The Mergers-Background of the Mergers" is hereby amended and supplemented by inserting the following paragraph at the end of the sixth full paragraph on page 79 as follows:
On
The section of the Proxy Statement/Prospectus titled "The Mergers-Background of the Mergers" is hereby amended and supplemented by inserting the following at the end of the fourth full paragraph on page 81 as follows: Stifel disclosed that in 2020 it had represented a current affiliate of Desktop Metal on a prior matter, and confirmed that this representation did not create a conflict of interest. The fees payable to Stifel in that prior matter did not exceed$750,000 and were earned by Stifel in connection with its services rendered toTrine Acquisition Corp. in its business combination with Desktop Metal. The section of the Proxy Statement/Prospectus titled "The Mergers-Background of the Mergers" is hereby amended and supplemented by amending and restating item (ii) of the first partial paragraph on page 82 as follows: (ii) authorized the Chief Executive Officer, the Chief Financial Officer and the General Counsel ofExOne (the "authorized officers") to conduct negotiations with representatives of Desktop Metal regarding a potential transaction, and
The section of the Proxy Statement/Prospectus titled "The Mergers-Background of the Mergers" is hereby amended and supplemented by inserting the following immediately after item (iii) of the first partial paragraph on page 82 as follows:
Mr. Strome was designated as the chair of theExOne transaction committee. TheExOne authorized officers were further authorized to (x) initiate and participate in discussions with, or otherwise assist or facilitate proposals from, potential parties to a potential business combination and (y) establish and revise procedures for the submission of proposals or indications of interest from other interested parties, in each case subject to oversight, input and approval of theExOne transaction committee and the full ExOne Board. -------------------------------------------------------------------------------- The section of the Proxy Statement/Prospectus titled "The Mergers-Background of the Mergers" is hereby amended and supplemented by amending and restating the fourth full paragraph on page 82 as follows: OnMay 25, 2021 , as recommended by theExOne transaction committee,Mr. Hartner calledMr. Fulop to inform him that Desktop Metal would need to contribute more cash to make a deal viable but thatExOne was willing to engage in mutual financial due diligence based on theMay 21, 2021 proposal. The section of the Proxy Statement/Prospectus titled "The Mergers-Background of the Mergers" is hereby amended and supplemented by amending and restating the seventh full paragraph on page 82 as follows: OnJune 4, 2021 , Company X entered into a non-disclosure agreement withExOne . The non-disclosure agreement did not contain a standstill provision or any other restriction that would preclude Company X from making a competing proposal forExOne , should it desire to do so. Later that day, and again onJune 7, 2021 ,Mr. Hartner and the CEO of Company X had conversations with a representative of Company X regarding a potential acquisition ofExOne . They agreed to engage in preliminary due diligence to explore the possible synergies of the transaction and no material terms of a possible transaction were discussed.
The section of the Proxy Statement/Prospectus titled "The Mergers-Background of the Mergers" is hereby amended and supplemented by inserting the following immediately after the third full paragraph on page 86 as follows:
They reported that the parties reached an agreement in principle on the revised price included in theExOne counterproposal subject to the resolution of other material terms. Agreement of the price was informed by the substantial decline in the market price ofExOne common stock and Desktop Metal common stock that had occurred since theJune 18, 2021 proposal date. Once agreed upon onAugust 6, 2021 , the price per share did not change and is reflected in the definitive Merger Agreement. The material discussion of retention bonuses between representatives ofExOne and Desktop Metal occurred after the price was agreed upon onAugust 6, 2021 , and such discussion focused primarily on whether the retention period would be designed to incentivize employees to retain their employment through the closing of the transaction and/or for a period continuing through a post-closing period. After extensive discussion and debate onAugust 9 and 10, 2021,ExOne's compensation committee determined the bonuses were consistent with market levels and approved the bonuses and reaffirmed that the restricted stock award grants made to theExOne executives accelerate and vest in accordance with the terms of their change of control agreements rather than accelerate and vest in full upon the closing of the Mergers like all other equityholders.
Also
The section of the Proxy Statement/Prospectus titled "The Mergers-Background of the Mergers" is hereby amended and supplemented by amending and restating the first sentence of the first full paragraph on page 87 as follows: OnAugust 11, 2021 , at a special meeting of the ExOne Board at which all members of the ExOne Board, members ofExOne's senior management team and representatives of each of Stifel andMcGuireWoods were present, representatives of Stifel reviewed Stifel's financial analyses ofExOne and Desktop Metal and Desktop Metal's$25.50 per share proposal. -------------------------------------------------------------------------------- The section of the Proxy Statement/Prospectus titled "The Mergers-Opinion ofExOne's Financial Advisor-ExOne Financial Analyses-Selected Comparable Company Analysis" is hereby amended and supplemented by replacing the tabular disclosure in the first table of page 96, in its entirety, as follows: Multiple: CY 2021E CY 2022E EV EV/Revenue EV/Revenue Kornit Digital Ltd.$ 5,731 18.4x 15.4x 3D Systems Corporation$ 4,184 6.9x 6.9x Proto Labs, Inc.$ 2,193 4.5x 4.1x Materialise NV$ 1,221 5.1x 4.6x Stratasys GmbH$ 1,076 1.8x 1.6x SLM Solutions Group AG$ 558 6.1x 4.2x voxeljet AG$ 61 1.9x 1.4x
The section of the Proxy Statement/Prospectus titled "The Mergers-Opinion of
EV/LTM EV/NTM Date Announced Acquirer Target EV Revenue EBITDA Revenue EBITDA 1/19/21 Proto Labs, Inc. 3D Hubs, Inc.$ 294 11.8x NA NA NA 1/15/21 Desktop Metal, Inc. EnvisionTEC, Inc.$ 304 7.1x 25.1x 5.5x NA 10/27/16 General Electric Company Concept Laser GmbH$ 764 7.6x NA NA NA 9/6/16 General Electric Company SLM Solutions Group(1)$ 741 8.1x NM 5.2x 22.0x 9/6/16 GE Aviation System LLC Arcam AB$ 633 8.6x NM 6.7x 43.1x 4/16/12 Stratasys Inc. Objet Ltd.$ 577 4.3x 24.4x 3.4x 17.1x
(1) Transaction was abandoned after failing to meet minimum acceptance threshold
for the voluntary tender. Acquirer refused to extend or change its offer for
the Target after an activist established a 20% position in target and stated
that "the company had alternatives."
similar terms shortly thereafter.
The section of the Proxy Statement/Prospectus titled "The Mergers-Opinion of
Stifel calculated projected unlevered free cash flow for the second half of calendar year 2021 through calendar year 2025 of approximately negative$2.7 million , negative$10.2 million , negative$6.9 million , negative$2.7 million and$5.5 million , respectively, as reviewed and approved byExOne management for Stifel's use, and using the mid-point convention, discounted these cash flows and the terminal value, at four and a half years to present values using discount rates of 11.5% - 13.5%, based onExOne's weighted average cost of capital ("WACC") using the Capital Asset Pricing Model ("CAPM"). The implied estimated present value of the terminal value ranged from approximately$305.5 million to approximately --------------------------------------------------------------------------------$509.1 million , based upon the midpoint of the discount range of 12.5%. The assumptions for the CAPM were based on a comparable company capital structure adjusted for a small-cap size premium of 2.2%, based upon Duff & Phelps 2020 Valuation Handbook - Guide to Cost of Capital, 9th decile. The section of the Proxy Statement/Prospectus titled "The Mergers-Opinion ofExOne's Financial Advisor-Desktop Metal Financial Analyses-Selected Comparable Company Analysis" is hereby amended and supplemented by replacing the tabular disclosure in the first table of page 100, in its entirety, as follows: Multiple: CY 2021E CY 2022E EV EV/Revenue EV/Revenue Kornit Digital Ltd.$ 5,731 18.4x 15.4x 3D Systems Corporation$ 4,316 6.9x 6.9x Proto Labs, Inc.$ 2,193 4.5x 4.1x Markforged Holding Corporation(1)$ 1,765 20.5x 14.7x Materialise NV$ 1,221 5.1x 4.6x Stratasys GmbH$ 1,076 1.8x 1.6x SLM Solutions Group AG$ 558 6.1x 4.2x voxeljet AG$ 61 1.9x 1.4x
(1) Like Desktop Metal, Markforged is an additive manufacturing company that was
acquired by a
projected financial information in connection with the acquisition
transaction.
The section of the Proxy Statement/Prospectus titled "The Mergers-Opinion ofExOne's Financial Advisor-Desktop Metal Financial Analyses-Discounted Cash Flow Analysis" is hereby amended and supplemented by amending and restating the first full paragraph on page 101 as follows: Stifel calculated projected unlevered free cash flow for the second half of calendar year 2021 through calendar year 2025 of approximately negative$72.4 million , negative$98.3 million , negative$45 million ,$50.6 million and$200.2 million , respectively, based upon the Desktop Metal Projections and approximately negative$42.8 million , negative$78 million , negative$36.6 million ,$32.5 million and$123.9 million based upon the Street estimates, as approved byExOne management for Stifel's use, and using the mid-point convention discounted these cash flows and the terminal value, at four and a half years, to present values using discount rates of 11.5% - 17.5%, based on the weighted average cost of capital of the comparable companies and Desktop Metal's WACC using the CAPM. The implied estimated present value of the terminal value ranged from approximately$1,957.1 million to approximately$2,935.6 million , based upon Desktop Metal Projections and the midpoint of the discount range of 14.5%. The assumptions for the CAPM were based on a comparable company capital structure adjusted for a small-cap size premium. Stifel determined this range was appropriate based on its professional judgement and experience and the significant difference between management and street estimates.
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The section of the Proxy Statement/Prospectus titled "The Mergers-Opinion of
Stifel performed an illustrative discounted cash flow analysis to determine indicators of illustrative implied equity values for the pro forma combined company using pro forma combined company financial forecasts that were based on the standalone company financial forecasts provided by the managements ofExOne and Desktop Metal and approved for Stifel's use by ExOne Management, and reflected estimates of public company cost synergies of approximately$6 million in annual savings (which were estimated to cost approximately$2.5 million in 2022 to achieve) provided byExOne's Management. Stifel calculated a range of indications of the present value of unlevered free cash flows for the pro forma combined company based upon the ExOne Projections and Desktop Metal Projections for projected second half of calendar year 2021 through calendar year 2025 of approximately negative$75.2 million , negative$105.1 million , negative$45.9 million ,$54.0 million and$211.7 million , respectively, using discount rates ranging from 11.5% to 17.5%.
The section of the Proxy Statement/Prospectus titled "The Mergers-Opinion of
Stifel then calculated a range of illustrative terminal values at the end of 2025 by using the "terminal multiple" method. Using the terminal multiple method, Stifel applied multiples ranging from 4.0x to 6.0x toExOne and Desktop Metal managements' estimates andExOne managements' estimates andDesktop Metal Street estimates of the projected calendar year 2025 pro forma combined company revenue. The range of multiples was selected by Stifel utilizing trading multiples ofExOne and Desktop Metal's public comparable companies and the companies' historical trading performance relative to peers while taking into account the relative contributions ofExOne and Desktop Metal to the pro forma company. These illustrative terminal values, which ranged from approximately$2,333.3 million to approximately$3,500.0 million , were then discounted toJune 30, 2021 to calculate ranges of implied indications of present values using the same ranges of discount rates, 11.5% to 17.5%, as described above. Stifel then added the ranges of the implied present values of the pro forma combined company's unlevered free cash flows for the projected years to the ranges of implied present values of the pro forma combined company's terminal values to derive a range of illustrative implied present enterprise values of the pro forma combined company. Stifel then subtracted pro forma combined net debt based on net debt as ofJune 30, 2021 for Desktop Metal of approximately$514.2 million andExOne of approximately$129.5 million , and subtracted approximately$210.1 million of cash, to derive a range of illustrative implied present equity values. Stifel then divided this range by the pro forma fully diluted share count of the combined company of approximately 319.3 million shares based upon the merger consideration of$25.50 per share to derive a range of illustrative implied present equity values per share. Stifel then applied the implied exchange ratio of 1.7951:1, based on the share prices ofExOne and Desktop Metal as ofAugust 10, 2021 , to the range plus$8.50 per share in cash to derive the impliedExOne equity value per share from the pro forma discounted cash flow analysis. The following table reflects the ranges of implied equity values per share resulting from these analyses. The section of the Proxy Statement/Prospectus titled "The Mergers-Opinion ofExOne's Financial Advisor-Miscellaneous" is hereby amended and supplemented by amending and restating the penultimate paragraph on page 102 as follows:ExOne paid Stifel a fee, which is referred to in this proxy statement/prospectus as the opinion fee, of$1,000,000 for providing the Stifel opinion to theExOne Board, which is not contingent upon the consummation of the Mergers. Stifel will receive an additional fee of approximately$6,762,500 contingent upon the successful consummation of the Mergers, assuming an implied merger consideration of$25.50 in value for each share ofExOne common stock exchanged. In addition,ExOne has agreed to reimburse Stifel for certain expenses in connection with its engagement, subject to certain limitations, and to indemnify Stifel for certain liabilities arising out of its engagement. InFebruary 2021 , Stifel served as Joint Bookrunner toExOne in its follow-on equity offering and earned a fee of$2,276,015 . Stifel was previously retained byExOne for two potential strategic acquisitions thatExOne explored, neither of which was consummated. In the past two years, other than in respect of the Mergers, Stifel has received compensation for investment banking and financial services fromExOne of$2,276,015 . In November andDecember 2020 , Stifel served as Capital Markets Advisor toTrine Acquisition Corp. in its business combination with Desktop Metal and earned a fee of$750,000 .
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Additional Information and Where to Find It
This communication relates to a proposed transaction between DM and the Company. In connection with the proposed transaction, DM has filed a registration statement on Form S-4 with theSEC , which included a document that serves as a preliminary proxy statement with respect toExOne and a prospectus with respect to DM's Class A common stock to be issued in the proposed transaction.ExOne subsequently filed a definitive proxy statement with theSEC onOctober 8, 2021 . On or aboutOctober 12, 2021 ,ExOne sent the definitive proxy statement to all ofExOne's stockholders as of the record date in connection with the meeting to be held to request stockholder approval of the proposed transaction. Each party also will file other documents regarding the proposed transaction with theSEC . BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE REGISTRATION STATEMENT, DEFINITIVE PROXY STATEMENT AND ALL OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and the Company's stockholders may obtain free copies of the proxy statement/prospectus and other documents that are filed or will be filed with theSEC by DM or the Company through the website maintained by theSEC at www.sec.gov. The documents filed by DM with theSEC also may be obtained free of charge at DM's website at ir.desktopmetal.com. The documents filed by the Company with theSEC also may be obtained free of charge at the Company's website at investor.exone.com.
Participants in the Solicitation
DM and the Company and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company's stockholders in connection with the proposed transaction. Information about the Company's directors and executive officers is set forth in the Company's proxy statement for its Annual Meeting of Stockholders on Schedule 14A filed with theSEC onApril 1, 2021 , and information about their ownership of the Company's common stock is set forth in the proxy statement/prospectus. Information about DM's directors and executive officers is set forth in DM's proxy statement for its Annual Meeting of Stockholders on Schedule 14A filed with theSEC onJune 17, 2021 and as set forth in the proxy statement/prospectus. To the extent that holdings of DM's or the Company's securities have changed since the amounts printed in DM's or the Company's proxy statement, such changes have been or will be reflected on Statements of Changes in Beneficial Ownership on Form 4 filed with theSEC . Additional information regarding the interests of those persons and other persons who may be deemed participants in the proposed transaction may be obtained by reading the proxy statement/prospectus regarding the proposed transaction. You may obtain free copies of these documents as described in the preceding paragraph. No Offer or Solicitation This communication is not intended to and shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act.
Safe Harbor Regarding Forward Looking Statements
This communication relates to a proposed business combination transaction . . .
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