--Quest Software reports a superior buyout offer to Insight
Venture's bid
--Quest doesn't name new bidder, but it is thought to be
Dell
--CNBC says Insight is looking to raise its offer
(Adds details about the new bid, Dell and the CNBC report
throughout.)
By Drew FitzGerald
Quest Software Inc. (QSFT) said it received a superior buyout
offer that values the company at up to $2.15 billion, trumping a
previous $2 billion bid from Insight Venture Partners to take the
company private.
The maker of database-management software said Thursday that an
undisclosed bidder offered to pay $25.50 a share in cash, above the
offer of $23 a share from Insight in March.
Quest didn't name the potential acquirer other than to call it
"a strategic bidder," which suggests it is likely a fellow
technology company, rather than another private-equity firm. Dell
Inc. (DELL) has been rumored to be the undisclosed bidder, although
a Dell spokesman declined to comment Thursday.
Insight has at least three days to match the bid. A
representative from the New York private-equity and venture-capital
firm wasn't immediately available for comment, but CNBC reported
Insight is looking into raising its offer.
Quest shares rose 9.5%, to $26.12, on hopes for a higher
offer.
If Insight doesn't modify its deal, which included keeping Vinny
Smith as chief executive, Quest will terminate the Insight
agreement. Insight is entitled to a $6.3 million breakup fee if its
go-private offer fails.
If the Quest shareholders who backed the Insight deal decide not
to support the new offer, Quest has agreed to grant the undisclosed
bidder an option to buy about 20% of its stock outstanding, as well
as a breakup fee of up to 3.5%, depending on certain
circumstances.
Last month, Quest said it received multiple alternative
proposals during the 60-day "go-shop" period, but the company
hadn't determined then if any of the bids were superior to
Insight's offer.
Wunderlich Securities analyst Brian Freed said Dell has seemed
"the lead contender" in the race to buy the company because Quest
would expand the computer and hardware maker's software offerings
without the overlap that other potential suitors would face.
Dell shares slid one cent, to $12.27.
Quest, which has more than 100,000 customers, provides software
associated with infrastructure hardware, such as databases,
servers, operating systems and virtual environments. The company
has faced increased competition from companies that build
enterprise systems for which it traditionally provided software,
such as Oracle Corp. (ORCL), which has been building its own tools
to manage systems.
The Aliso Viejo, Calif., company has responded to the increased
competition by making acquisitions, which has helped grow its
revenue but contributed to Quest's earnings getting cut in half
last year.
At the current price, Quest can be viewed as expensive. The
latest offer values Quest at 15.5 times future earnings, which is a
higher valuation than those of Microsoft Corp. (MSFT), SAP AG
(SAP.XE) and Oracle, even though the three larger software
companies are expected to report 2013 sales growth equal to or
better than Quest's.
--Melodie Warner contributed to this article.
Write to Drew FitzGerald at andrew.fitzgerald@dowjones.com.