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Desktop Metal, ExOne Ex-Board Face $575 Million Merger Challenge

Nov. 23, 2021, 8:23 PM

A former ExOne Co. investor filed suit in Delaware against its ex-board and acquirer, Desktop Metal Inc., claiming they rushed to close their $575 million merger during a court holiday after being told the plaintiff would try to block the deal over concerns about DMI’s compliance practices.

The lawsuit, docketed Tuesday, accuses DMI and ExOne’s directors of consummating the transaction Nov. 12, before a federal judge in Pittsburgh could rule on the request for a preliminary injunction, which the plaintiff submitted Nov. 11, when federal courts were closed for Veterans Day.

That bid to block a tie-up between the two 3D printing companies allegedly stemmed from disclosures DMI made Nov. 8—on the eve of a shareholder vote approving the transaction—stating that it had initiated a probe into a whistleblower report about a subsidiary’s “product compliance practices.”

Given that DMI had already engaged an investigator and secured a resignation pledge from the subsidiary’s CEO, the company must have been aware of the problems “days, weeks, or months” earlier, when the deal was still in the works, according to the complaint in Delaware’s Chancery Court.

ExOne’s shareholders, on the other hand, “had no opportunity to gauge the risks inherent in the pending whistleblower investigation when they submitted their votes to approve the transaction,” the suit says.

A DMI spokesperson told Bloomberg Law on Tuesday that the company can’t comment on pending litigation. ExOne didn’t immediately respond to a separate request for comment.

According to the complaint, DMI’s whistleblower investigation could yield revelations that weigh down its share price, harming former ExOne investors who were paid largely in stock.

The case is the second brought in Delaware over the deal, after an earlier lawsuit filed by a different former ExOne investor seeking internal company files to look into somewhat different allegations. Records inspection cases often reflect an attempt to drum up fiduciary breach claims.

Cause of Action: Breach of fiduciary duty; aiding and abetting.

Relief: Damages, costs, fees, interest, and an order declaring the Nov. 9 shareholder vote ineffective.

Potential Class Size: Former holders of 22.3 million ExOne shares.

Attorneys: The plaintiff is represented by Bielli & Klauder LLC and Ademi LLP.

The case is Campanella v. Rockwell, Del. Ch., No. 2021-1013, complaint filed 11/23/21.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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