Nano Dimension ordered to complete Desktop Metal acquisition, is that so bad?

The Delaware Court of Chancery has ruled in favor of Desktop Metal in its pending litigation against Nano Dimension Ltd. and Nano US I, Inc. (together, “Nano”) regarding the merger agreement between Desktop Metal and Nano dated July 2, 2024. This means that Nano Dimension has now been forced to complete the acquisition of Desktop Metal, but is that really so bad?

When Nano Dimension raised nearly $2 billion following a stock rally a few years back, surprising almost everyone, it sought to buy companies that would enable it to expand its market reach and product portfolio. However, at the time, it could only buy two relatively small 3D printing companies: Adamtec, a maker of ceramic DLP 3D printers (also capable of processing metal slurries), and Nano Fabrica, a maker of micro stereolithography machines. Both are strategic businesses but not yet large enough to build a leading global AM business on. Even Nano Dimension’s own technology for Additively Manufactured Electronics remains very much niche. At the time, every other 3D printing company was simply too expensive to buy. Now, that’s no longer the case.

Desktop Metal followed a similar trajectory and was, in some ways, more successful in taking over companies. After raising its own $2 billion via a SPAC merger, it acquired various companies, including two that have shaped the history of 3D printing: EnvisionTEC (rebranded to ETEC) and ExOne, the leader in sand and metal binder jetting technology. Even though Desktop Metal was more successful than Nano Dimension in acquiring companies, this marked the company’s demise in the upside-down world of financial AM. Desktop Metal burnt through cash (and stock value) faster than Nano Dimension. So, incidentally, did Markeforged, which also went through a rise and fall, while acquiring Digital Metal, makers of one of the most efficient metal binder jetting technology on the market.

A few months ago, Nano Dimension would have loved to get its hands on Desktop Metal and its acquisitions. Now, after several changes in its own organization and in the AM industry as a whole, it has been forced to. But this is not necessarily a bad thing. Nano Dimension can now offer proven metal additive manufacturing capabilities. This probably means it will have to invest all of its remaining cash on integrating and building the business; even so, there are no guarantees of success. But the company has a unique portfolio well suited for the next phase of AM growth.

For now Nano Dimension is acting a bit like the Fox and the Grapes from one of Aesop’s Fables. The story concerns a fox that tries to eat grapes from a vine but cannot reach them. Rather than admit defeat, he states they are undesirable. For Nano Dimension, the exact opposite is true. It no longer wanted Desktop Metal but, now that it has been forced to acquire it, the company says it wanted (and prepared for) it all along. Which is certainly true, at least in part.

“Since the recomposition of the Nano Dimension Board on December 15, 2024, the Company has diligently prepared for the integration of Desktop Metal, despite ongoing litigation,” Nano Dimension said in a statement. “These proactive efforts position Nano Dimension to maximize the combined entity’s potential.

“Nano Dimension’s strategic objective (outlined in our January 28, 2025 shareholder letter) – the statement goes on – is to become the preeminent provider of digital manufacturing solutions for high-value, high-growth applications to the aerospace & defense, automotive, electronics, industrial, and medical sectors. An acquisition of Desktop Metal, along with Nano Dimension’s pending merger with Markforged Holding Corporation (NYSE: MKFG) (“Markforged”), would significantly expand Nano Dimension’s scale and customer base.

Background information on the court ruling:

In its March 24 post-trial opinion and order, the Court found that Nano materially breached the Merger Agreement, rejected Nano’s counterclaims, and granted Desktop Metal specific performance.

The Court ordered that, within 48 hours of its order, Nano must agree to and execute a national security agreement with the Committee on Foreign Investment in the United States, which is the sole remaining condition to closing the merger. The Court further ordered that if the closing has not occurred by March 31, 2025, the end date under the Merger Agreement may be extended, at Desktop Metal’s discretion, until the closing of the merger. The Court’s ruling constitutes a final judgment on the specific performance claims, making it immediately appealable to the Delaware Supreme Court under Court of Chancery Rule 54(b).

Nano Dimension’s former CEO Yoav Stern defined the merger deal with Desktop Metal’s CEO Ric Fulop. However things have changed at the helm of Nano Dimenson since. After changing several members of the Board – most of whom were aligned with former CEO Yoav Stern – the company appointed Mr. Julien Lederman, previously VP of Corporate Development, as Interim CEO. Mr Lederman has been in charge of the recent M&A strategy at Nano Dimension, executing over $500 million in acquisitions.

At the same time, Nano Dimension responded to Desktop Metal’s recent merger-related lawsuit by saying that “The Company believes the lawsuit is without merit and inconsistent with the terms of the Merger Agreement, particularly with respect to the Company’s right to work through the review process that is underway with the Committee on Foreign Investment in the United States (“CFIUS”).” Nano Dimension believes that the lawsuit is “nothing more than an effort by Desktop Metal to prevent the Company from exercising its rights under the Merger Agreement and to impose deadlines and obligations that are inconsistent with that agreement.” Thus Nano Dimension intends to vigorously defend itself and preserve its rights under the Merger Agreement.

Desktop Metal now intends to move expeditiously toward closing as soon as possible while continuing to serve its customers, employees and other stakeholders. The Court’s opinion and order will be made available on Desktop Metal’s Investor Relations website.