Mitek Systems Unanimously Rejects ASG Technologies’ Proposal

Mitek Systems (NASDAQ:MITK) announced on Monday (November 5) that its board of directors has unanimously determined that the non-binding, unsolicited proposal from ASG Technologies is not in the best interests of Mitek’s shareholders.

ASG Technologies, a provider of critical enterprise software products, proposed to acquire Mitek through a letter that was sent to Mitek’s board and made public on October 31. ASG proposed to acquire Mitek, a company engaged in mobile capture and digital identity verification systems, for US$10 per share.

In Monday’s release, Mitek said that the proposal from ASG “substantially undervalues” the company, but that it affirms confidence in its current strategy, one that has significant upside while generating solid results.

According to Mitek’s board, the company has a favorable chance to control the identity verification market, which is set to grow to US$16.6 billion by 2022, according to a report from Research and Markets.

Further, the company expects to grow its revenues by 31 percent to 35 percent in 2019 while also delivering targeted profit margins between 18 percent to 20 percent.

“ASG’s opportunistically-timed proposal and tactics are designed to seize for ASG value that belongs to Mitek’s shareholders,” Bruce Hansen, chairman of Mitek, said in the release. “The board believes that ASG’s proposal substantially undervalues the company and its prospects for continued growth and value creation, and that the company’s current strategy will deliver meaningfully more value to Mitek’s shareholders than ASG’s proposal.”  

Crucially, Mitek also highlighted some key points which demonstrates its momentum, including its recently announced fiscal 2018 year-end results. The company recorded revenues of US$64 million for fiscal year 2018, which is up 40 percent since 2012. Mitek’s strategic ID business grew 69 percent, which the company says represents a significant growth opportunities going forward.

“Mitek sits at the forefront of powerful global trends in mobile commerce and is well-positioned to deliver significant and sustained growth, as we tap into our technology leadership, customer relationships and proven ability to innovate and scale,” Hansen said [in which release?].

In terms of the financial value of the proposal, Mitek said that ASG’s offer represents only 13 percent premium to its three month unaffected volume weighted average price (VWAP) and offers no premium to its 52-week high.

Mitek said that the price is “meaningfully below” the average premium paid for US and European merger and acquisition deals in the technology sector over the last 10 years.

Following the announcement, shares of Mitek were down 1.04 percent and closed the trading session on Monday at US$9.52. The stock, which had a trading volume of over 600,000 in the day, opened at US$9.60 and had a high of US$9.84 and a low of US$9.36. Shares of Mitek increased over 40 percent in the last month and 6.70 percent year-to-date.

Mitek’s shares currently have a “Buy” ranking on TradingView with 16 verticals in favor, seven in neutral and three against. The stock has an analyst target price of US$15.50 on TipRanks with a high estimate of US$17.50 and a low of US$13.50.

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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.