DMC Global Inc. (Nasdaq: BOOM) has rejected a non-binding proposal from Steel Connect to acquire all outstanding shares of the company not already owned by Steel Connect for $10.18 per share in cash. Broomfield-based DMC’s board of directors reviewed the proposal in consultation with legal and financial advisers and concluded that it undervalues the business and future potential for stockholders.
According to the company, key reasons for the rejection include: the proposal does not adequately compensate stockholders for the turnaround at the DMC subsidiary Arcadia nor its long-term value creation potential; recently, DMC has returned Arcadia’s former president, Jim Schladen, to lead the business, which is now refocusing on its core operations and high-end residential products. Arcadia is positioned to participate in the reconstruction of neighborhoods affected by recent wildfires in Southern California.
DMC also stated that the proposal fails to consider cyclical improvements at its subsidiary DynaEnergetics. The company, known for its factory-assembled well-perforating systems, has made strides in automating its North American manufacturing, with benefits anticipated in the first half of 2025. DynaEnergetics has also completed a value engineering initiative for its flagship DynaStage system, which is set to gain traction in North America’s unconventional oil and gas sector.
The DMC board said it believes Steel Connect has prioritized its own interests over those of DMC stockholders. Steel Connect’s proposals included an investment to fund obligations under the Arcadia joint venture in exchange for shares and significant representation on DMC’s board. The board viewed these terms as detrimental to DMC stockholders, asserting that they would result in Steel Connect gaining control without a proper premium.
Instead, DMC has negotiated an extension on obligations related to the Arcadia joint venture until at least Sept. 6, 2026, allowing for potential debt reduction and refinancing under more favorable terms.
DMC reports that its business is stabilizing and its fourth quarter sales and adjusted EBITDA are expected to exceed the high end of its guidance range. The board has initiated a search for a new CEO with the help of an executive search firm. They also expressed that the Steel Connect proposal undervalues DMC and the ongoing value creation initiatives that benefit stockholders.
BofA Securities serves as financial adviser to DMC, while Womble Bond Dickinson (US) LLP and Richards, Layton & Finger, P.A. are the legal advisers. Sodali & Co. is acting as strategic stockholder adviser, and Gagnier Communications LLC is the strategic communications adviser.
