DMC Global rejects Steel Connect takeover bid

BROOMFIELD — DMC Global Inc.’s (Nasdaq: BOOM) board of directors has rejected the latest acquisition offer from supply-chain-management firm Steel Connect Inc.

The Broomfield-based oilfield-services, construction-products and infrastructure operator told investors Monday morning that it has “acknowledged receipt of a non-binding proposal from Steel Connect to acquire all of the outstanding shares of common stock of the Company, not already owned by Steel Connect, for $10.18 per share in cash.” The board said at the time that it “will consider the proposal in consultation with its legal and financial advisers and in accordance with its fiduciary duties.”

On Wednesday morning, DMC’s board of directors said: “After considerable review and deliberation, the Board determined the Proposal undervalues DMC’s business and its potential to drive future risk-adjusted value for all stockholders.”

Steel Connect, which already owns 9.9% of the outstanding shares of DMC Global, has made several unsolicited — and thus far unsuccessful — bids to buy DMC, which has struggled with leadership continuity and has seen its stock price lose more than 50% of its value over the last 12 months, after DMC began exploring its options for selling off DynaEnergetics, the company’s energy-industry services division, and NobelClad, DMC’s industrial infrastructure and transportation division. DMC’s other business unit is Arcadia, a supplier of architectural building products.

DMC’s board of directors provided several reasons for its rejection of Steel Connect’s takeover bid. Those include:

• The offer “fails to compensate stockholders for the turnaround at Arcadia and its long-term value creation potential.” The company recently “recruited back Arcadia’s former president, Jim Schladen, to lead the business,” which “(a)s a regional architectural building products leader based in the Los Angeles metro area,” is “uniquely positioned to participate in the long-term reconstruction of many neighborhoods destroyed by the recent wildfires in Southern California.”
• The offer “fails to compensate stockholders for any cyclical improvement at DynaEnergetics and proactive steps taken during 2024 to strengthen the business.” DMC’s energy business “is expected to benefit from an improved economic setting and more energy-friendly regulatory environment.”
• “The Board believes Steel Connect has repeatedly attempted to advance its interests over those of DMC’s stockholders.” Recently negotiated extensions of certain financial obligations provide “significant optionality to reduce debt for the benefit of all existing stockholders and refinance on potentially more favorable terms at the appropriate time.”
• “DMC’s business is stabilizing, CEO search efforts are underway, and DMC’s value creation path is becoming clear.” Steel Connect’s offer “would capture the upside of the important initiatives in progress or recently completed, that is due to all of the Company’s stockholders.”
• The most-recent offer isn’t as generous as past Steel Connect acquisition bids. “From the time of its initial proposal to acquire the Company for $16.50 per share, to the delivery of its latest proposal for $10.18 per share, Steel Connect has repeatedly demonstrated it is not serious about engaging in good faith with DMC.”

Investors appeared to react favorably Wednesday morning to DMC’s decision. As of 9:40 a.m., the company’s stock price was $8.72, up 3.93% on the day. Over the past five days, DMC’s stock is up nearly 9%, but still a far cry from its 52-week high of $19.71.

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