Mitek Systems, which is being targeted for takeover by a subsidiary of Elliott, billionaire Paul Singer’s activist hedge fund, has unanimously rejected its $380 million offer.
The Oct. 31 offer—rejected Monday—was made by ASG Technologies Group, a Florida-based software company that last year sold a controlling stake to Evergreen Coast Capital, Elliott’s Menlo Park, CA, affiliate, which focuses on technology investing.
ASG offered to pay $10 per share for Mitek (NASDAQ: [[ticker:MITK]]), which has developed technology that is used for mobile document capture and digital identity verification. ASG pointed out in a press release announcing the offer that the price was a 51 percent premium over Mitek’s closing price on Oct. 9. Mitek, in turn, noted the proposal offered no premium over its 52-week high. Mitek stock last closed at $10 per share nearly one year ago, on Nov. 8, 2017.
Elliott, which is based in New York, has been snapping up Mitek stock and other securities, accumulating enough to become one of its largest investors, according to ASG. Mitek called the move a “hostile” effort to pressure it into accepting ASG’s proposal.
San Diego-based Mitek made its name with its mobile banking technology, including remote check deposit. Recently, bolstered by acquisitions, it has built up a business around digital identification verification.
But an unexpected announcement in late August revealing that its CEO and chief financial officer were leaving the company resulted in a one-day, 15-percent drop in its stock price.
Jim DeBello, who has served as Mitek’s chief executive for 15 years (and as a director for 23), is leaving at year’s end. CFO Jeff Davison is slated to leave at the end of November. At the time of the announcement, Mitek said the pair of C-suite departures were unrelated. The company said Davison was leaving to join a company near his home in Bozeman, MT. No reason for DeBello’s departure was given.
Mitek’s board of directors on Monday accused ASG of acting opportunistically, asserting that its proposal—which boosted Mitek stock by 14 percent—undervalued the company.
In the rationale Mitek gave for its rejection, Bruce Hansen, its chairman, pointed to the company’s fourth-quarter and 2018 financial results.
On Nov. 1, Mitek reported company record revenue of $21 million for the fourth quarter of its fiscal 2018, 63 percent more than the year prior, and record annual revenue of $63.6 million, 40 percent more than the year prior. Recent acquisitions contributed. Mitek acquired French artificial intelligence and imaging technology company A2iA for $51 million in May and Barcelona-based digital identity verification software specialist iCar for $15 million last October. Its ID business grew by 69 percent during the year, which the company said highlighted growth opportunities ahead.
ASG, however, said Mitek’s ID capabilities were “very early and perceived to not be as robust” as compared with competitors, based on research conducted by ASG and Elliott.
Mitek anticipates revenue to grow more than 30 percent, to between $83 million and $86 million, in this fiscal year.
“The growth trajectory of the company is substantial, and we are making excellent progress in our search to name Mitek’s new CEO,” Hansen said in the company statement That said, the board remains open to “strategic transactions,” he added.
Hansen, who took over as chairman after the news of DeBello’s departure was announced, is a co-founder and former CEO of ID Analytics, which was acquired by LifeLock in 2012. He’s also the former president of machine-learning pioneer HNC Software, which was acquired by FICO in 2002.
