--Quest Software reports a superior buyout offer to Insight
Venture's bid
--CEO wouldn't roll over shares under new proposal
--Software maker Commvault's stock slides on news
(Adds details on chief executive, Commvault; updates with
closing share price.)
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 it
private.
The maker of database-management software said Thursday 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 buyer 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)
is reportedly the undisclosed bidder, according a Reuters report. 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 9.2% to $26.06 Thursday on hopes for a higher
offer.
If Insight doesn't modify its deal, which included keeping
Chairman and Chief Executive Vinny Smith at Quest's helm, the
software company will likely terminate the Insight agreement.
Insight is entitled to a $6.3 million breakup fee if its go-private
offer fails.
Smith holds a 34% stake in Quest, according to FactSet Research.
It's unclear what Smith's role at Quest would be under the latest
proposal or where he stands on the offer. The new proposal doesn't
require him to roll over his own shares to help finance the deal,
like the Insight offer.
Smith's stake is large enough to impede the undisclosed bidder,
but if he opposes the deal, Quest would let the undisclosed bidder
buy newly issued shares equal to about 20% of its stock
outstanding. Such a move would diminish Smith's ability to block
the deal without adding to the final price tag because the newly
issued stock simply would be reabsorbed by the purchaser.
Smith led Quest as chief executive from 1998 to 2008 and
returned to that role four months ago, after former CEO Douglas
Garn resigned, citing health reasons. Quest unveiled its deal with
Insight about three weeks later.
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
to be "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 closed up 6 cents at $12.34. Shares of fellow
data-management company Commvault Systems Inc. (CVLT) fell 4.4% at
$43.70 on fears the deal could signal Dell, a major customer, is
moving some of its spending on data-management services to
Quest.
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,
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.