It seems The ExOne Company (NASDAQ:XONE) and Desktop Metal (NYSE:DM) are two great tastes that taste great together. Both makers of industrial 3D printing machines, both companies that reported earnings yesterday, these companies have now announced that they plan to merge.
Now here's how they differ: As of 10:45 a.m. EDT today, Desktop Metal stock is up a respectable 2.3% on the earnings and merger news, but ExOne shares are rocketing 40.8%. Why is that?
In twin earnings reports yesterday, neither company fared particularly well, but ExOne had the slightly better news, with a $0.25-per-share loss that matched analyst estimates, and revenue of $18.8 million that beat estimates. Desktop Metals, in contrast, reported a bigger loss ($0.17 per share, instead of Wall Street's predicted $0.09 loss) and smaller revenue -- $19 million, or about $70,000 short of consensus.
Of course, all those merger numbers dwindled in significance thanks to the other big news of the day: Desktop Metal is buying ExOne. (Because in mergers, the "bought" company generally gets bought at a premium, ExOne is the stock enjoying the bigger price spike.)
Now let's look at the details of the merger:
Desktop Metal will pay a total of $575 million in cash and stock for ExOne. This sum will be paid in the form of $8.50 in cash and $17 of Desktop Metal stock for each outstanding share of ExOne, resulting in a buyout price per share of $25.50. That's very close to where ExOne stock trades right now, indicating that most investors don't seem to be anticipating a competing offer -- but also that most investors expect this merger to go through.
Note, however, that the buyout price could fluctuate based on how Desktop Metal's shares change in price in the coming days. Ultimately, the companies calculate that Desktop Metal may be required to issue anywhere from 39.5 million to 48.3 million new shares to pay for its purchase, on top of the cash required.
For investors who own ExOne, therefore, there's probably little need to wait for the merger to close (sometime in the fourth quarter of 2021) to cash in their profits on this deal. While the number of shares provided by Desktop Metal may change, absent a rival suitor, the total value of the acquisition should not change.