Steel Connect Calls on DMC Global to Meaningfully Engage Around Acquisition Proposal that Would Provide Certain, Premium Value to Shareholders

Rhea-AI Summary

Steel Connect has reiterated its proposal to acquire DMC Global Inc. (NASDAQ: BOOM) for $16.50 per share in cash, representing a 51% premium to DMC's current share price. Steel Connect, which owns 9.8% of DMC's outstanding shares, expressed frustration with the lack of progress since their initial offer in May 2024. The company criticized DMC's board for not engaging in discussions and for actions deemed detrimental to shareholders. As an alternative, Steel Connect is open to acquiring DMC's DynaEnergetics and NobelClad businesses for approximately $185 million. Steel Connect warned it may consider all potential alternatives, including a possible tender offer, if DMC continues to refuse discussions.

Positive

• Steel Connect's offer represents a 51% premium to DMC Global's current share price
• The acquisition proposal is not subject to any financing contingency
• Steel Connect offers an alternative to acquire specific DMC businesses for $185 million

Negative

• DMC Global's share price has declined by approximately 17.5% since Steel Connect's initial proposal
• Lack of engagement from DMC's board in acquisition discussions over 3.5 months
• DMC's board actions viewed as detrimental to shareholders, including restricting Steel Connect from acquiring additional shares

Insights

Financial Analyst

Steel Connect's proposal to acquire DMC Global for $16.50 per share represents a significant 51% premium to the current share price, indicating potential undervaluation of DMC. The alternative offer to acquire DynaEnergetics and NobelClad for $185 million suggests these businesses might be the primary value drivers. DMC's 17.5% share price decline since the initial proposal raises questions about market confidence and the company's strategic direction. The Board's apparent reluctance to engage could be seen as a red flag for corporate governance. Investors should closely monitor this situation, as it may lead to a proxy fight or tender offer, potentially impacting short-term stock volatility and long-term shareholder value.

Corporate Governance Expert

The DMC Board's lack of engagement with Steel Connect's acquisition proposal over a 3.5-month period raises serious corporate governance concerns. By seemingly ignoring a premium offer and potential alternatives, the Board may not be fulfilling its fiduciary duty to maximize shareholder value. The refusal to allow Steel to acquire additional shares in the open market could be viewed as an entrenchment tactic. The lack of transparency regarding the strategic alternatives process and the Arcadia put/call right valuation further erodes shareholder trust. This situation highlights the importance of robust shareholder communication and responsive governance practices, especially in the face of acquisition interest.

M&A Specialist

Steel Connect's dual-pronged approach - offering to acquire DMC Global entirely or its key business units - demonstrates strategic flexibility in M&A negotiations. The all-cash offer with no financing contingency is attractive in today's market. However, the Board's reluctance to engage suggests potential concerns about deal valuation or strategic fit. The threat of a tender offer could pressure the Board to negotiate, but it also risks becoming hostile. The significant premium offered might indicate Steel sees untapped value or synergies. For DMC shareholders, this situation presents a classic dilemma between accepting a certain premium now versus the uncertain potential of standalone value creation, making the Board's next moves crucial.

Steel Reiterates Proposal to Acquire the Company for $16.50 Per Share in Cash and Issues Public Letter to DMC Board

Proposal Represents ~51% Premium to DMC’s Current Share Price, Which Has Declined Significantly in Recent Months

Steel is Alternatively Open to Discussing Acquisition of DMC’s DynaEnergetics and NobelClad Businesses

NEW YORK--(BUSINESS WIRE)-- Steel Connect, Inc. (together with its affiliates, “Steel”), which beneficially owns approximately 9.8% of the outstanding shares of DMC Global Inc. (Nasdaq: BOOM) (the “Company”), today issued a public letter to the Company’s Board of Directors (the “Board”). The full text of the letter is below.

Dear DMC Board Members,

On May 31, 2024, we made a proposal to acquire all the remaining shares of DMC that we do not already own for $16.50 in cash. Today we are reiterating that proposal which, as we previously indicated, is not subject to any financing contingency and would provide shareholders with maximum value. At the time of our initial proposal, it represented a 25% premium to DMC’s share price. Today it represents an approximately 51% premium.

We have consistently made clear – both publicly in the disclosure of our proposal and in private communications – our desire to engage in constructive discussions and limited confirmatory due diligence with the goal of swiftly consummating a transaction. Unfortunately, no real progress has occurred since May due to your refusal to agree to reasonable requests we have made prior to entering into a confidentiality agreement with you. Further, the Company has taken a number of other actions that we view as detrimental to shareholders, including refusing to allow us to show our support for the stock by acquiring additional shares in the open market and failing to provide any updates about the Company’s strategic alternatives process or transparency regarding the status or valuation of the put/call right for Arcadia. Shareholders deserve better.

To not engage in an actionable manner with an interested buyer over the course of three and a half months is, in our opinion, counter to the best interests of all DMC shareholders. Such a delay is made even worse by the fact that DMC’s share price has declined precipitously – by approximately 17.5% – since our proposal became public. It is unacceptable for shareholders to watch their investment evaporate while the Board fails to entertain a serious proposal that would provide certain near-term value.

We stand ready to engage in good faith around our proposal. Additionally, as an alternative to an acquisition of the entirety of DMC, we would be open to acquiring DMC’s DynaEnergetics and NobelClad businesses for a combination of our current shareholdings and cash for approximately $185 million in the aggregate.

It is our hope that we can execute a nondisclosure agreement, expeditiously conduct due diligence and agree on a transaction in short order. However, should you continue to refuse to enter into discussions, we will consider all potential alternatives available to us as shareholders, including potentially commencing a tender offer for the remaining outstanding shares of DMC that we do not own.

Sincerely,

Warren Lichtenstein

Executive Chairman, Steel Connect

View source version on businesswire.com: https://www.businesswire.com/news/home/20240916026005/en/

Longacre Square Partners

Joe Germani

jgermani@longacresquare.com

Source: Steel Connect, Inc.

FAQ

What is Steel Connect's acquisition offer for DMC Global (BOOM)?

Steel Connect has proposed to acquire DMC Global (BOOM) for $16.50 per share in cash, which represents a 51% premium to DMC's current share price.

How much of DMC Global (BOOM) does Steel Connect currently own?

Steel Connect and its affiliates beneficially own approximately 9.8% of the outstanding shares of DMC Global (BOOM).

What alternative acquisition proposal has Steel Connect made for DMC Global (BOOM)?

As an alternative, Steel Connect is open to acquiring DMC Global's DynaEnergetics and NobelClad businesses for approximately $185 million in total.

How has DMC Global's (BOOM) stock price performed since Steel Connect's initial proposal?

DMC Global's (BOOM) share price has declined by approximately 17.5% since Steel Connect's proposal became public in May 2024.