DEFA14A: FONAR to Go Private in $90M Deal Led by CEO

FONAR Corporation has entered into a definitive agreement to be acquired by an acquisition group led by its CEO for $19.00 per share in cash, taking the company private.

Summary

• FONAR Corporation has signed a definitive merger agreement to be acquired by FONAR, LLC, an acquisition group led by its CEO, Timothy Damadian.
• The transaction is an all-cash deal, with common stockholders receiving $19.00 per share.
• Other share classes will receive: Class B Common Stock $19.00, Class C Common Stock $6.34, and Class A Non-voting Preferred Stock $10.50.
• The Special Committee of independent directors unanimously recommended the merger, and the Board (excluding interested directors) unanimously approved it.
• The deal requires approval from a majority of all outstanding capital stock and a majority of votes cast by disinterested stockholders.
• The transaction is expected to close in the third fiscal quarter of 2026, no later than March 12, 2026, with potential extensions.
• The company's common stock will be delisted from Nasdaq and deregistered from the SEC upon completion.

Sentiment

Score: 8

Explanation: The filing announces a definitive merger agreement for a take-private transaction at a substantial premium to recent trading prices, unanimously recommended by an independent committee and the board. The financing is fully committed, and the transaction is not contingent on financing, reducing execution risk for shareholders. While the company will no longer be public, the offer provides a clear, immediate cash return at a favorable valuation.

Positives

• Common stockholders receive a 31.5% premium over the closing share price prior to the announcement.
• The offer represents a 21.9% premium over the closing share price on July 8, 2025, when the initial non-binding proposal was announced.
• The offer is a 39.7% premium over the 90-day average closing price ending June 30, 2025.
• The Special Committee, composed of independent directors, unanimously recommended the transaction, and the Board (with interested directors recused) unanimously approved it.
• The transaction is not subject to any financing conditions, with $90 million in debt and equity commitments secured.
• A fairness opinion was provided by Marshall & Stevens Transaction Advisory Services LLC, stating the merger consideration is fair from a financial point of view.

Negatives

• The company will be taken private, meaning public shareholders will no longer have an equity interest or the opportunity to participate in future growth.
• The CEO and other executives are part of the Acquisition Group, raising potential conflicts of interest, though a Special Committee was used to mitigate this.
• The voting agreements from the Acquisition Group members (6,622,872 votes) ensure a significant block of votes in favor, but these are excluded from the 'disinterested stockholder approval' calculation.
• A termination fee of $450,000 plus Parent's expenses is payable by the Company under certain circumstances, potentially limiting other superior offers.

Risks

• The occurrence of any event, change, or other circumstances that could give rise to the termination of the Merger Agreement.
• The outcome of any legal proceedings that may be instituted against the Company and others following the announcement of the Merger Agreement.
• The inability to complete the proposed transactions due to the failure to satisfy any condition to the Closing, including obtaining the Requisite Company Vote and other Closing conditions.
• Risks that the proposed Merger disrupts current plans and operations of the Company.
• Potential difficulties in employee retention as a result of the proposed transactions.
• Legislative, regulatory, and economic developments.
• Risks related to disruption of management's attention from the Company's ongoing business operations due to the proposed transactions.
• The effect of the announcement of the proposed transactions on the Company's relationships with referral sources and vendors, operating results, and business generally.
• Changes in global, regional, or local political, economic, business, competitive, market, regulatory, and other factors described in the Company's news releases and SEC filings, including the Form 10-K under 'Risk Factors'.

Future Outlook

The company expects to release its customary financial results for the second quarter ended December 31, 2025, in February 2026. The transaction is anticipated to close in the third fiscal quarter of 2026. Upon completion, the company's common stock will be delisted from Nasdaq and deregistered under the Exchange Act.

Management Comments

• FONAR Corporation confirmed it entered into a definitive agreement on December 23, 2025, under which Buyer will acquire all of the issued and outstanding shares of the Company.
• Buyer is controlled by the previously disclosed acquisition group led by Chief Executive Officer Timothy Damadian and consisting of certain members of the Company's management team and board of directors.

Industry Context

This take-private transaction for FONAR, 'The Inventor of MR Scanning,' highlights a strategic shift away from public market scrutiny, potentially allowing the management-led group to pursue long-term strategies or restructuring without quarterly pressures. This trend is common for mature or niche technology companies. The continued focus on specialized MRI technology, including the UPRIGHT Multi-Position MRI and new cerebral hydraulics technology, alongside its diagnostic imaging management subsidiary (HMCA), indicates a commitment to its core healthcare technology and services, but under private ownership.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• The risk of any legal proceedings that may be instituted against the Company and others following the announcement of the Merger Agreement is noted.
• The Company is required to promptly advise Parent of any stockholder litigation relating to the agreement and allow Parent to participate in defense and settlement.

Related Party Transactions

• The Acquisition Group, led by CEO Timothy Damadian and including COO Luciano Bonanni and director Ron Lehman, is the buyer. These individuals are members of Parent holding equity interests.
• Parent and its affiliates own 248,772 shares of Company Common Stock, 254,964 shares of Company Class C Common Stock, and 12,927 shares of Company Class A Non-voting Preferred Stock, which were acquired from members of Parent more than three years prior to the agreement date as contributions for membership interests in Parent.
• Voting Agreements have been entered into with certain stockholders consisting of the members of the Acquisition Group, who have agreed to vote their 6,622,872 shares in favor of the merger. These votes are excluded from the Disinterested Stockholder Approval.

Stakeholder Impact

• Shareholders: Public shareholders will receive cash for their shares at a significant premium, but will no longer hold equity in the company. Disinterested stockholder approval is required.
• Employees: Potential difficulties in employee retention are noted as a risk. The current officers and key employees are expected to be kept available on substantially comparable terms.
• Management: Key management (CEO, COO) and a director are leading the acquisition, indicating continued involvement and control in the private entity.
• Referral Sources and Vendors: The announcement of the proposed transaction could affect relationships with these parties.
• Creditors: The transaction involves significant debt financing ($45 million), which will impact the company's capital structure and leverage post-merger.

Next Steps

• Company to prepare and file a proxy statement on Schedule 14A with the SEC.
• Company and certain participants to jointly prepare and file a Rule 13E-3 transaction statement on Schedule 13E-3 with the SEC.
• Company to mail the definitive proxy statement, Schedule 13E-3, and proxy card to stockholders.
• Hold a special meeting of stockholders (Company Stockholders Meeting) to vote on the approval and adoption of the Merger Agreement and the Merger.
• Obtain the Requisite Company Vote and Disinterested Stockholder Approval.
• Satisfy or waive other closing conditions, including regulatory approvals.
• Closing of the Merger is expected in Q3 2026, no later than March 12, 2026.
• Upon completion, the Company Common Stock will be delisted from Nasdaq and deregistered under the Exchange Act.
• Company expects to release Q2 2026 financial results in February 2026.

Key Dates

Recommendation

The definitive merger agreement offers a substantial cash premium (31.5% over the prior day's close, 39.7% over the 90-day average) to public shareholders. The transaction is fully financed and has received unanimous recommendation from an independent Special Committee and the Board, indicating a high likelihood of completion. While there are customary closing conditions and risks, the significant premium and committed financing make this an attractive opportunity for shareholders to realize immediate value.

Keywords

FONAR Corporation, FONR, Merger Agreement, Take Private, Acquisition, CEO-led buyout, Special Committee, Stockholder approval, Delisting, Deregistration, MRI technology, Health Management Company of America, Diagnostic imaging, Share premium