DEFA14A: FARO Technologies Amends Merger Proxy Amid Shareholder Lawsuits, Reaffirms AMETEK Deal at $44.00 Per Share

FARO Technologies, Inc. has filed supplemental disclosures to its definitive proxy statement to address shareholder litigation and facilitate the proposed all-cash merger with AMETEK, Inc. at $44.00 per share.

Summary

• FARO Technologies, Inc. (FARO) filed a DEFA14A (Form 8-K) on July 2, 2025, to supplement its definitive proxy statement related to the proposed merger with AMETEK, Inc. (Parent).
• The supplement addresses two shareholder lawsuits, Sullivan v. FARO Technologies, Inc. et al. (filed June 19, 2025) and Brady v. FARO Technologies, Inc. et al. (filed June 20, 2025), and several demand letters from purported FARO shareholders.
• The lawsuits and demand letters allege that the Proxy Statement omitted material information regarding financial projections, financial analyses performed by FARO's financial advisor (Evercore), potential conflicts of interest of the Board and management, and the sales process leading to the Merger.
• FARO and the other defendants assert that the allegations are without merit and that the Proxy Statement fully complies with applicable law, but are providing the supplemental disclosures voluntarily to avoid delaying or adversely affecting the merger and to minimize defense expenses.
• The FARO board of directors unanimously recommends shareholders vote FOR the merger agreement, FOR adjourning the special meeting if necessary, and FOR the non-binding advisory proposal on executive compensation.
• Supplemental disclosures detail that Evercore initiated discussions with 36 strategic and financial parties, leading to 14 confidentiality agreements, 12 of which included customary standstill provisions.
• AMETEK's initial indication of interest on March 6, 2025, proposed an all-cash purchase price of $36 per share, and did not include any proposed terms or guarantee of employment for FARO's executive officers.
• Evercore's Discounted Cash Flow Analysis, based on a perpetuity growth rate range of 4.0% to 6.0% and discount rates of 12.5% to 14.5%, indicated implied equity values per share of $30.25-$46.25.
• Evercore's Selected Precedent Transactions Analysis, based on a median TEV / LTM Adjusted EBITDA multiple of 16.0x, indicated implied equity values per share of $27.75 to $44.50.
• Equity research analysts' price targets known to Evercore as of May 5, 2025, ranged from $38.00 to $45.00.
• Antitrust clearances have been granted by the Federal Trade Commission (June 12, 2025), the German Federal Cartel Office (June 26, 2025), and the Austrian Federal Competition Authority (June 28, 2025).
• The Merger remains subject to antitrust approval in Romania.

Sentiment

Score: 7

Explanation: The document indicates a proactive approach by FARO to address shareholder litigation and facilitate a merger at a premium price, with significant antitrust approvals already secured. While litigation introduces uncertainty, the company's actions aim to mitigate delays and ensure the deal's consummation, which is favorable for shareholders at the proposed price.

Positives

• The FARO board of directors unanimously recommends the adoption and approval of the Merger Agreement and the transactions contemplated thereby.
• The Merger Consideration of $44.00 in cash per share represents a significant premium over the closing price of FARO common stock of $31.45 on May 5, 2025.
• Key antitrust approvals have been secured from the Federal Trade Commission (early termination of HSR waiting period), German Federal Cartel Office, and Austrian Federal Competition Authority.
• Evercore's financial analyses, including Discounted Cash Flow and Selected Precedent Transactions, indicated implied equity value ranges that support or are below the $44.00 merger consideration.
• Equity research analysts' price targets for FARO common stock ranged from $38.00 to $45.00, with the merger consideration falling within this range.

Negatives

• FARO Technologies and its board are facing two shareholder lawsuits and several demand letters alleging omitted material information in the proxy statement.
• The lawsuits seek to enjoin the Merger, or alternatively, rescission of the Merger Agreement, rescissory damages, compensatory damages, and reimbursement of attorneys' fees and litigation costs.
• The Company is providing supplemental disclosures solely to avoid the risk of delaying or otherwise adversely affecting the consummation of the Merger and to minimize the expense and distraction of defending such actions.

Risks

• Inability to consummate the Merger within the anticipated time period, or at all, due to failure to obtain shareholder approval, required regulatory approvals (e.g., Romania), or failure to satisfy other conditions.
• The Merger disrupting FARO's current plans and operations or diverting management's attention from ongoing business.
• The announcement of the Merger affecting FARO's operating results and business generally.
• The announcement of the Merger impacting the Company's ability to retain and hire key personnel and maintain relationships with customers, suppliers, and others.
• FARO's stock price potentially declining significantly if the Merger is not consummated.
• The nature, cost, and outcome of any legal proceedings, including those related to the Merger.
• The risk that the Merger Agreement may be terminated in circumstances requiring FARO to pay a termination fee of approximately $28 million.
• Other risks and uncertainties discussed in FARO's Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent SEC filings.

Future Outlook

The future outlook is primarily focused on the consummation of the proposed merger with AMETEK, Inc. The Company anticipates the merger will proceed, subject to shareholder approval and remaining regulatory clearances, specifically in Romania. Forward-looking statements also touch upon demand for and customer acceptance of FARO's products, product development and launches, and the Company's growth, strategic, and restructuring plans, all of which are subject to various known and unknown risks and uncertainties.

Management Comments

• "The Company and the other defendants believe that the allegations in the complaints and the demand letters are without merit, that the Proxy Statement fully complies with the Exchange Act and all other applicable law, and that no further disclosure is required."
• "However, solely to avoid the risk of delaying or otherwise adversely affecting the consummation of the Merger and to minimize the expense and distraction of defending such actions, FARO hereby voluntarily amends and supplements the Proxy Statement."
• "The FARO board of directors unanimously recommends that you vote: (i) FOR the proposal to adopt and approve the Merger Agreement and the transactions contemplated thereby, including the Merger; (ii) FOR the proposal to adjourn the special meeting to a later date or dates if necessary; and (iii) FOR the non-binding, advisory proposal to approve certain compensation that will or may become payable to FAROs named executive officers in connection with the Merger, each as described in the Proxy Statement."

Industry Context

This announcement relates to the measurement and imaging industry, as evidenced by the comparable publicly traded companies and precedent transactions used in Evercore's financial analyses. The proposed acquisition of FARO by AMETEK, a diversified industrial company, signifies ongoing consolidation and strategic shifts within this specialized technology sector.

Comparison to Industry Standards

• Evercore's analysis of selected publicly traded companies in the measurement and imaging industry showed a median TEV / 2025E Adjusted EBITDA of 16.5x and a median TEV / 2026E Adjusted EBITDA of 14.3x.
• Selected comparable companies included Basler Aktiengesellschaft, Cognex Corporation, Datalogic S.p.A., Hexagon AB, NOVANTA INC., Renishaw Plc, Spectris Plc, Teledyne Technologies Incorporated, Trimble Inc., and Zebra Technologies Corporation.
• Evercore's analysis of selected precedent transactions in the measurement and imaging industry indicated a median TEV / LTM Adjusted EBITDA multiple of 16.0x.
• Precedent transactions reviewed included acquisitions by Spectris plc, KEYSIGHT TECHNOLOGIES, INC., ENPRO INC., Emerson Electric Co., IDEX CORPORATION, NORDSON CORPORATION, Arcline Investment Management LP, Intertek Group plc, Sensata Technologies Holding plc, Teledyne Technologies Incorporated, AMPHENOL CORPORATION, SGS SA, and AMETEK, Inc. (MOCON, Inc. in 2017).
• The Merger Consideration of $44.00 per share compares favorably to FARO's closing price of $31.45 on May 5, 2025, and falls within or above the implied equity value ranges from Evercore's Discounted Cash Flow Analysis ($30.25-$46.25) and Selected Precedent Transactions Analysis ($27.75-$44.50), and within the range of equity research analysts' price targets ($38.00-$45.00).

Corporate Governance

Legal Proceedings

• Sullivan v. FARO Technologies, Inc. et al., Index No. 653711/2025, filed June 19, 2025, in the Supreme Court of the State of New York.
• Brady v. FARO Technologies, Inc. et al., Index No. 653725/2025, filed June 20, 2025, in the Supreme Court of the State of New York.
• Several demand letters from purported FARO shareholders.
• Claims assert purported failure in relation to certain disclosures under New York state law and Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 14a-9.
• Allegations include omitted material information regarding financial projections, financial analyses, potential conflicts of interest, and the sales process leading to the Merger.
• Complaints seek to enjoin the Merger unless and until alleged omitted material information is disclosed, and seek other reliefs including rescission of the Merger Agreement and/or rescissory damages, compensatory damages, and reimbursement of attorneys' fees and other litigation costs.
• FARO and the other defendants believe the allegations are without merit and that the Proxy Statement fully complies with applicable law.

Related Party Transactions

• Directors and executive officers own shares of FARO common stock for which they are entitled to receive the Merger Consideration of $44.00 per share, like all other shareholders. This is in addition to other interests in the Merger that may be different from, or in addition to, general shareholder interests.

Stakeholder Impact

• **Shareholders**: Will receive $44.00 per share in cash if the merger is approved and consummated, representing a significant premium. However, they are currently impacted by litigation that could delay or prevent the merger.
• **Employees**: The merger could disrupt current plans and operations and affect the Company's ability to retain and hire key personnel. AMETEK's initial offer did not include employment guarantees for executive officers.
• **Customers and Suppliers**: The merger announcement could affect the Company's ability to maintain existing relationships with customers and suppliers.

Next Steps

• Special meeting of FARO shareholders on July 15, 2025, to vote on the Merger Agreement and related proposals.
• Obtain remaining antitrust approval in Romania.
• Consummation of the Merger, subject to all conditions being met.

Key Dates

Recommendation

Keywords

FARO Technologies, AMETEK, Merger, Acquisition, Proxy Statement, SEC Filing, Shareholder Litigation, Antitrust Approval, Corporate Governance, Financial Analysis, M&A, Measurement and Imaging Industry