November 20, 2018 / 5:26 PM / 20 days ago

Hedge fund Elliott raises pressure on Mitek after takeover bid rejected

NEW YORK (Reuters) - Hedge fund Elliott Management on Tuesday asked Mitek Systems Inc (MITK.O) to scrap a so-called “poison pill” to let it buy more stock and said it may press for board changes after the software company took steps to protect itself from the activist investor.

Elliott, which invests more than $34 billion, wrote to Mitek’s board and asked for “relief from the poison pill recently enacted” in order to buy as much as 14.9 percent of the company’s stock.

Elliott has not disclosed the size of its stake, which includes common stock and swaps, but has said it is one of the company’s biggest shareholders.

Mitek did not immediately respond to a request for comment.

Elliott is increasing the pressure on San Diego-based Mitek at a time when software company ASG Technologies, which the hedge fund owns, has been pushing to buy Mitek for $10 a share. Mitek has so far rebuffed the overture.

Mitek’s share price has climbed 8.64 percent over the past month and was trading at $9.48 on Tuesday.

Elliott wrote that ASG President and Chief Executive Charles Sansbury first approached Mitek about a possible takeover in August, roughly one week before the company announced that long-serving CEO James DeBello and Chief Financial Officer Jeff Davison would be leaving. Earlier this month, the company said on its earnings call that ASG reached out “after the announcement of our executive changes.”

Elliott said Mitek was adopting a “path of entrenchment” and had not properly engaged with the hedge fund.

On Oct. 31, ASG Technologies said it wanted to buy Mitek for $10 a share in cash, a 51 percent premium above the stock’s closing price on Oct. 9, 2018.

The hedge fund noted that director Bruce Hansen sold Mitek stock at $8.66 earlier in the year, which prompted it to question, in its letter, why a deal at $10 a share would undervalue the company. Elliott also said a number of board members were stretched thin by serving on too many boards.

The deadline for nominating directors is Dec. 7. Elliott has often asked for board seats.

ASG received an investment last year from Evergreen Coast Capital, the private equity arm of Elliott Management. Elliott has been using Evergreen to acquire both public and private companies, and sometimes involves Evergreen when it pushes companies to explore a sale.

Reporting by Svea Herbst-Bayliss; Editing by Bernadette Baum and Dan Grebler

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