On Tuesday, Stifel adjusted its price target for DMC Global (NASDAQ:BOOM), reducing it to $17.00 from the previous $19.00, while keeping a Buy rating on the stock. The revision comes as Steel Connect shows continued interest in acquiring DMC Global, offering $16.50 per share in cash for all the shares it doesn't already own.
This proposal represents a 51% premium over DMC's last closing price and a significant increase over the 22% premium based on the average closing price from June 17.
DMC Global's shares have seen an 18% decline since the initial acquisition proposal by Steel Connect. Despite the drop in share value, Steel Connect has expressed willingness to acquire DMC's individual business units, DynaEnergetics and NobelClad, if necessary. As of the second quarter of 2024, Steel Connect reported approximately $269 million in cash reserves, indicating a strong position to finance the proposed transaction.
Stifel's revised target takes into account the potential outcomes of the acquisition scenarios. While the firm has lowered the target price to $17, the maintained Buy rating suggests a continued positive outlook on DMC Global's stock. The offer from Steel Connect is still on the table, and it is clear that they are prepared to fund the acquisition, should it go ahead.
In other recent news, Steel Connect, Inc. has renewed its bid to acquire DMC Global Inc., offering to purchase the remaining shares for $16.50 each in cash. This proposal, representing a roughly 51% premium over DMC's current share price, also includes a potential acquisition of two of DMC's business units, DynaEnergetics and NobelClad, for a combined $185 million. Steel Connect's proposal is intended to deliver maximum value to shareholders and is not contingent on financing.
Simultaneously, DMC Global has reported stronger-than-expected financial results for the second quarter, with sales amounting to $171.2 million and an adjusted EBITDA of $19.4 million. However, the company expects consolidated sales for the third quarter to fall between $158 million and $168 million, with an adjusted EBITDA forecasted to be between $15 million and $18 million.
Following these developments, Stifel maintained a Buy rating on DMC Global shares but reduced the price target to $19.00 from the previous $24.00. The firm's revised price target is based on a sum-of-the-parts analysis, considering the different segments of DMC Global's business. Stifel believes that the potential sale of DynaEnergetics and NobelClad could act as significant catalysts for the company's stock.
InvestingPro Insights
As DMC Global (NASDAQ:BOOM) navigates the acquisition proposal from Steel Connect, investors can gain additional insights from InvestingPro. Notably, DMC Global exhibits a high shareholder yield, indicating that the company has been effective in returning value to its investors. This could be a critical factor for shareholders evaluating the acquisition offer. In the context of the acquisition, it's also relevant that DMC Global's liquid assets exceed its short-term obligations, suggesting a strong liquidity position which may affect the ongoing negotiations.
While the price of DMC Global has experienced a significant decline over the past year, analysts remain optimistic, predicting profitability for the company this year. This contrasts with the recent adjustments by analysts who have revised their earnings expectations downwards for the upcoming period. Although the company does not pay dividends, its profitability over the last twelve months and the forecasted return to profit could influence investor sentiment regarding the acquisition's value proposition.
For investors looking for a deeper dive into DMC Global's financial health and future prospects, InvestingPro offers additional tips and insights. In total, there are 7 InvestingPro Tips available for DMC Global, which can be accessed for further detailed analysis and investment considerations at InvestingPro.
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