October 10, 2018 / 4:18 PM / in 5 days

Exclusive: Mitek rebuffs Elliott-backed ASG's takeover approach - sources

(Reuters) - Mitek Systems Inc, a U.S. provider of financial technology to banks, has rejected a takeover approach from hedge fund Elliott Management Corp’s software company ASG Technologies, people familiar with the matter said on Wednesday.

ASG Technologies’ bid comes at a time of uncertainty for Mitek, which said in August that both Chief Executive Officer Jim DeBello and Chief Financial Officer Jeff Davison were stepping down to either retire or pursue other roles.

ASG first approached Mitek over the summer, the sources said. After ASG submitted an offer in writing valuing Mitek at what it considered a significant premium, Mitek rejected the offer and told ASG it preferred to remain independent, according to the sources.

Last week, ASG wrote a letter to Mitek’s board urging it again to engage in merger discussions, the sources added. Mitek is not pursuing a sale, they said.

The exact price of ASG’s offer could not be learned. The sources asked not to be named because the matter is confidential. Elliott, ASG and Mitek declined to comment.

Mitek shares ended trading on Wednesday up 17 percent at $7.74 on the news, giving the company a market capitalization of close to $300 million.

Based in San Diego, Mitek has agreements with large banks such as JPMorgan Chase & Co to handle mobile check deposits. It forecast annual revenue of between $62 million and $63 million this year.

The company in July lowered its forecast for annual profit margins to a range of 15 percent to 16 percent from 19 percent to 20 percent. The company’s core business could be challenged as the circulation of physical checks is on the decline, according to analysts.

ASG, based in Naples, Florida, received an investment last year from Evergreen Coast Capital, the private equity arm of activist hedge fund Elliott Management. A unit of KKR & Co became an investor in ASG last year when it acquired FS Investments from Blackstone Group’s credit arm, GSO.

ASG is looking to expand its software products to banks through an acquisition of Mitek and increase the development of Mitek’s technology that helps verify identities, the sources said. ASG’s software platform, Mobius, already helps banks store data for certain amounts of time to comply with regulations.

The company has about $250 million in revenue annually, the sources familiar with the matter said. It acquired a startup called Mowbly for an undisclosed sum earlier this year.

Elliott has been using its private equity arm, Evergreen, to acquire both public and private companies and sometimes involves ASG when it pushes companies to explore a sale.

Reporting by Liana B. Baker in New York; editing by Matthew Lewis and Phil Berlowitz

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