--Quest discloses a superior bid from strategic buyer
--New offer values software company at $2.32 billion, up from
previous $2.17 billion value
--Private equity group has ability to match or beat increased
amount
Quest Software Inc. (QSFT) disclosed a higher, superior takeover
offer from its "strategic bidder," elevating the battle for the
data-management software maker to $2.32 billion.
Quest said the undisclosed third party--which a person familiar
with the matter has said is Dell Inc. (DELL)--boosted its offer to
$27.50 a share. The bid has been deemed superior to the $2.17
billion, or $25.75 a share, offered by private-equity shops Insight
Venture Partners and Vector Capital.
The Insight team, which includes Chief Executive Vinny Smith,
has the opportunity to match or beat the increased amount. Quest
said if the new strategic offer remains superior, it would
terminate its existing merger agreement with Insight.
The private-equity groups declined to comment. Dell wasn't
immediately available to comment, nor was Quest.
Quest shares climbed 5.4% to $27.64 in recent trading, topping
the new offer. Dell, meanwhile, slid 1.8% to $11.99.
Quest, of Aliso Viejo, Calif., has faced mounting competition in
its traditional specialty--software for managing databases--as
vendors such as Oracle Corp. (ORCL) have introduced their own
management tools. Quest has responded by trying to diversify its
business by acquiring smaller rivals. That has helped grow its
revenue but contributed to a drop in its earnings last year.
Meanwhile, Dell has been attempting to remake its business model
in the face of soft sales of personal computers. It has attempted
to boost both revenue and profits by acquiring higher-margin
businesses, including data storage, security and networking
technologies. Since 2009, the company has acquired about a dozen
companies, but it has been slower to expand its software
business.
The fight over Quest echoes a similar battle Dell waged in 2010
for high-end data-storage maker 3Par Inc. Dell eventually bowed out
after Hewlett-Packard Co. (HPQ) bid $1.6 billion for the company,
which makes rapidly accessible storage drives that allow
corporations to run more efficient databases.
Analysts say a merger with Quest would give Dell an immediately
bigger footprint in the software market, with opportunities to
expand going forward.
"There are some assets Quest has that could provide Dell with
synergies on the revenue and expense side," Jefferies analyst Aaron
Schwartz said.
Schwartz added he believes the private equity group will match
the latest bid, but he said it's unlikely the group will go much
higher.
"We thought all along that a potential strategic buyer had more
flexibility on the price range relative to a buyout group with
financial sponsors involved," Schwartz said, citing bigger cash
stockpiles and the ability for a public company to more easily tap
the debt market.
Insight originally offered $23 a share in March and later
boosted that bid to $25.75, adding fellow private-equity firm
Vector Capital to its effort.
(Victoria Stilwell and Drew FitzGerald contributed to this
report.)
--Write to Shara Tibken at shara.tibken@dowjones.com