Software developer ASG Technologies Group Inc., a portfolio company of the hedge fund Elliott Management Corp., on Wednesday announced a $425 million offer to buy Mitek Systems Inc., a leader in the mobile remote deposit capture software market that also provides identity-verification and related applications.
San Diego-based Mitek issued no public comment on the unsolicited offer, and a spokesperson did not respond to a Digital Transactions News inquiry. The company is scheduled to release financial results Thursday afternoon for its fourth quarter and full year of fiscal 2018 ended Sept. 30.
Naples, Fla.-based ASG is offering $10 per Mitek share, a price it says represents a 51% premium to the stock’s closing price on Oct. 9, before it was affected by merger talk.
ASG first approached Mitek over the summer about a potential buyout but was rebuffed, according to Reuters. In early October, ASG again urged Mitek’s board to consider an acquisition, the news service reported.
The ASG/Elliott offer comes at an uncertain time for Mitek, whose flagship product is called Mobile Deposit, James DeBello, its president chief executive since 2003, is leaving the company at year’s end, and chief financial officer Jeff Davison is leaving at the end of this month.
In a public letter released Wednesday, ASG chief executive Charles Sansbury said that while Mitek’s revenues have grown substantially since the company’s 2011 initial public offering, its profitability is declining, its stock is underperforming, and “over two-thirds of the business is tied to the secularly declining check deposit capture market.”
In addition, the news about DeBello and Davison leaving “has severely shaken shareholder confidence as evidenced by the recent decline in stock price that was reversed only when the existence of our proposal was reported in the press,” the letter says. “More importantly, the departures create significant operational uncertainty and risk.”
ASG provides business-management software, including the Mobius content-management application, to 3,000 customers that include 70% of Fortune 500 firms. In his letter, Sansbury said the best future for Mitek’s products “is as a part of a broader platform at ASG where we can invest behind extending the company’s identity-verification solutions via further automation. We will be able to provide our financial-services customers with a compelling, end-to-end information-management solution, cross selling Mitek’s mobile capture offering into our Mobius content-repository customer base.”
Still, how Mitek becoming an Elliott portfolio company would affect the mobile capture market is unclear.
“It has been amazing what Mitek has been able to achieve as a relatively small, independent company,” John Leekley, CEO and publisher of Alpharetta, Ga.-based RemoteDepositCapture.com, tells Digital Transactions News by email. “They have played a critical role in transforming an industry, with the vast majority of all financial institutions in the U.S. with mobile deposit as (indirect) customers. With the backing and connections of a larger parent, I am excited to see how Mitek’s Mobile Deposit and identity-verification technologies can evolve and be used in additional applications and markets.”