CORE Proposes Acquisition of Fathom 3D Printing Service Amid Economic Slump


Fathom Digital Manufacturing Corp. (NYSE: FATH), involved in the on-demand digital manufacturing sector, has gotten a non-binding acquisition proposal from CORE Industrial Partners, a private equity firm based in Chicago having a significant role in the company’s consolidation and public listing efforts. Valuing Fathom’s shares at $4.50 each, this offer potentially indicates a change in the company’s ownership structure, especially considering that CORE Funds currently hold about 63% of Fathom’s voting power.

The Special Committee of Fathom, including Adam DeWitt, David Fisher, and Peter Leemputte, is responsible for evaluating this proposal along with other potential strategies or proposals. There hasn’t been a specified timeline set for decision-making, nor is there any certainty over a definitive agreement or transaction realization.

History of CORE with FATHOM

CORE purchased FATHOM on September 26, 2019, by means of CORE’s portfolio company Midwest Composite Technologies. The outcome was one of the largest independent AM service providers globally that boasts above 80 3D printing machines. The ensuing entity then carried out a series of acquisitions of other machine and 3D printing shops throughout North America.

Fathom rang the opening bell of the NYSE on April 19, 2022. Image courtesy of Fathom via LinkedIn.

In 2021, Fathom announced its plans to go public through a merger with special purpose acquisition company (SPAC) Altimar Acquisition Corp. II, a deal valued at $1.5 billion and expected to raise around $80 million through a Private Investment in Public Equity (PIPE) at $10.00 per share. Fathom’s shares experienced fluctuations post-listing, starting from a high of $10.53 and then stabilizing at around $7.

As one of the last 3D printing companies to join the trend of SPAC mergers in 2021, Fathom may have benefitted the least from the public markets. In 2022, the company experienced financial challenges, with a third-quarter revenue decrease of 3.1% to $40.2 million and a substantial net loss of $(1,046.1) million, including a significant non-cash goodwill impairment. Despite this, year-to-date revenue increased by 13.8% to $122.7 million, driven by acquisitions and growth in strategic accounts.

This led, in October 2023, to Fathom’s appointment of a new CEO, Carey Chen. Chen has been an operating advisor with CORE since 2017 and has led such manufacturing companies as Cincinnati Incorporated, known for its big area AM 3D printers. It is expected that he will be involved in righting the ship.

Private Equity in 3D Printing Services

There is an ongoing evolution of private equity’s influence in the 3D printing sector. A good example of this adaptive process is the proposal by CORE. This equity firm has continuously exerted sway in this industry, often deploying strategies such as roll-ups; this involves allaying smaller firms, resulting in more competitive and robust entities. You can learn more about this trend through the following link.

The push towards consolidation is partly ignited by the prevailing economic conditions, which have amplified the appeal of 3D printing technologies to private equity due to their promise for innovation and profit. CORE’s move to secure Fathom aligns with this larger pattern of tactical acquisitions and consolidation in the sector.

Notably, CORE’s investment is not limited to Fathom. It also includes UPTIVE, another service bureau. Whilst Fathom has gone public, UPTIVE remains private. This variation could indicate the equity firm’s strategy testing in the digital manufacturing space. Apart from these two service bureaus, CORE has also sponsored 3DXTECH, a 3D printers and materials manufacturer.

Fathom’s timing for going public may not have been the best. At present, CORE can consider privatizing this arm of its AM investments and explore new approaches, possibly merging it with UPTIVE. The current landscape might offer the perfect opportunity for this, given that the U.S. service industry has not yet reached its peak and competitors like ADDMAN and Cumberland Additive are starting to strengthen their own operations.

Original source


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