Hedge fund Elliott raises pressure on Mitek after takeover bid rejected

By Svea Herbst-Bayliss and Liana B. Baker

NEW YORK (Reuters) - Hedge fund Elliott Management on Tuesday asked Mitek Systems Inc 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 in assets, 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.

Mitek did not immediately respond to a request for comment.

Elliott is increasing the pressure on San Diego-based Mitek at a time that 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.

 

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.

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

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

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

"The Board's refusal to engage with ASG, led us to believe that significant changes at the Board level may be required," the letter said.

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 ASG when it pushes companies to explore a sale.

(Reporting by Svea Herbst-Bayliss; Editing by Bernadette Baum)