As many supply chain managers seek to better manage volatility in truck capacity and move supply chains closer to the end consumer, additive manufacturing, or 3D printing, has gained favor.
In a Wednesday press release, Burlington, Massachusetts-based Desktop Metal Inc. announced plans to go public through a merger agreement with special purpose acquisition company (SPAC) Trine Acquisition Corp. (NYSE: TRNE). The combined entity will be named Desktop Metal Inc. with an estimated equity value of $2.5 billion, continuing to be listed on the New York Stock Exchange under the ticker DM.
The press release said Desktop Metal views a public listing as a way to "accelerate its growth trajectory" and "capitalize on the strong secular tailwinds supporting the reshoring of manufacturing and supply chain flexibility."
The company reported the additive manufacturing industry experienced 20% annual growth in the decade extending from 2006, but has accelerated to a 25% compound annual growth rate in the last three years. The industry is expected to reach $146 billion in 2030 after closing 2019 at $12 billion in market size.
"This market inflection is being driven by a shift in applications from design prototyping and tooling to mass production of end-use parts, enabled by the emergence of what Desktop Metal refers to as ‘Additive Manufacturing 2.0,' a wave of next-generation additive manufacturing technologies that unlock throughput, repeatability and competitive part costs," the release stated.
Manufacturing has traditionally occurred where labor is inexpensive and transportation costs aren't prohibitive. Removing or significantly reducing labor costs in the manufacturing portion of the supply chain allows manufacturing facilities to be placed in higher rent areas closer to the buyer.
Desktop Metal believes its capabilities will allow it to compete directly with conventional manufacturing, which produces goods valued at $12 trillion annually.
"Our solutions are designed for both massive throughput and ease of use, enabling organizations of all sizes to make parts faster, more cost effectively and with higher levels of complexity and sustainability than ever before," said Desktop Metal co-founder, Chairman and CEO Ric Fulop.
The deal is expected to bring in $575 million in proceeds, including $300 million of cash from Trine and a $275 million private investment in public equity (PIPE) that is fully committed at $10 per share from investors. The proceeds will be used to fund acquisitions.
Desktop Metal's existing shareholders are expected to hold approximately 74% of the outstanding common stock following the closing of the deal. The transaction is subject to approval of shareholders from Desktop Metal and Trine and the U.S. Securities and Exchange Commission. Boards from both companies have unanimously approved the deal, which is expected to close in the fourth quarter.
"After evaluating more than 100 companies, we identified Desktop Metal as the most unique and compelling opportunity, a company that we believe is primed to be the leader in a rapidly growing industry thanks to their substantial technology moat, deep customer relationships across diverse end markets and impressive, recurring unit economics," said Trine Chairman and CEO Leo Hindery Jr.
Credit Suisse is the exclusive capital markets adviser to Desktop Metal and private placement agent to Trine. BTIG LLC is the financial and capital markets adviser to Trine.
"We are energized to make our debut as a publicly traded company and begin our partnership with Trine, which will provide the resources to accelerate our go-to-market efforts and enhance our relentless efforts in R&D," said Fulop.
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