Hartland-based Fathom Digital Manufacturing Corp. plans to go public through an acquisition by a special purpose acquisition corporation or SPAC.
Altimar Acquisition Corp. II, which is already publicly traded and was sponsored by New York-based HPS Investment Partners, will acquire Fathom in a deal that pays $318 million in cash to existing Fathom shareholders and pays down $22 million in debt.
The transaction values the combined firm at nearly $1.5 billion. The existing Fathom shareholders will retain nearly 64% ownership of the combined company. Public shareholders will own around 25% of the company, Altimar II’s sponsor, HPS, will own around 5% and investors in an $80 million private investment in public equity or PIPE offering will own almost 6%.
"We evaluated a wide range of potential targets, but it became clear to us in our search that Fathom's ideal blend of speed, scalability, breadth and financial strength positions it to become a leading player in the modern manufacturing market,” said Tom Wasserman, chairman and chief executive officer of Altimar II and managing director of HPS.
HPS sponsored the launch of Altimar II in January through an initial public offering that raised $345 million. It was the third blank check company HPS has backed. It launched a SPAC in 2019 that eventually acquired Desktop Metal, a Massachusetts company that designs and markets 3D printing systems, in August 2020. Altimar Acquisition Corp. I went public the same month and eventually combined with Owl Rock Capital Group and Dyal Capital Partners to form Blue Owl Capital, an alternative asset management firm focused on direct lending and capital solutions.
Altimar II’s stock closed at $10.04 per share on Thursday and has been trading around $10.20 to $10.26 on Friday after news of the deal was announced.
The legacy of Fathom includes Hartland-based Midwest Composite Technologies, which was acquired by Chicago-based private equity firm CORE Industrial Partners in 2018. Following the acquisition, MCT completed a number of acquisitions and mergers, including with Oakland-based Fathom in 2019.
In 2020, the two companies along with ICOMold and GPI Prototype united under the Fathom brand. Ryan Martin, the chief executive officer of MCT, continued on as CEO of the company and the headquarters remained in Hartland. CORE also remained the majority owner of the company.
"When we first invested in Fathom, we knew the company had a clear path for growth as one of the earliest adopters of additive manufacturing in a fragmented manufacturing space that was only just realizing the benefits of the Industry 4.0 on-demand business model,” said John May, managing partner of CORE. “As we predicted, the market has evolved in Fathom's favor, and the company maintains a strong runway for expansion with a high degree of organic and acquisition growth potential.”
Fathom offers capabilities in plastic and metal additive manufacturing, CNC machining, injection molding and tooling, sheet metal fabrication and design and engineering. The company primarily focused on helping corporate customers with new product development and prototyping. It’s 12 facilities cover around 450,000 square feet.
“Product lifecycles are so much shorter than they were even five years ago, and companies need an on-demand advanced manufacturing partner who can move quickly and serve all their requirements without sacrificing quality,” Martin said. “We believe we are well-positioned to become that manufacturing partner of choice for more clients.”
Fathom had revenue of $149 million and adjusted EBITDA of $40 million in fiscal 2020. The company is expecting to grow those figures to $205 million and $54 million by fiscal 2022 and anticipates a compound annual growth rate of 22% through fiscal 2025. Hitting that growth rate would take revenue to $408 million.
“We feel Fathom is ready for the public markets,” Martin said on an investor call Friday.
He said the deal would help strengthen the company’s financial position and help it capitalize on opportunities for organic and inorganic growth, noting Fathom has experience with acquisitions following 13 deals in the past three years.
“We see a target rich environment to expand the Fathom platform,” Martin said, adding the company will benefit from being able to offer its public stock as currency in deals.
Martin, along with chief financial officer Mark Frost and chief commercial officer Rich Stump will continue leading the company after the deal closes. T.J. Chung, senior partner at CORE, will continue to serve as board chairman.
"We have full confidence in Ryan and his management team as they embark on this new chapter,” said Fathom board member Bob Nardelli. “Along with the partners at CORE, we have built a strong company, drawing from managers and board members with a diverse range of personal and professional backgrounds, that is ready to capitalize on the significant secular growth opportunity presented by Industry 4.0."