Quest Received Multiple Buyout Proposals During Shop Period

Quest Software Inc. (QSFT), which agreed in March to be bought by private-equity firm Insight Venture Partners for about $2 billion, said it received several other offers during a so-called “go-shop” period.

Many of the options are “reasonably expected to lead to a superior proposal,” the Aliso Viejo, California-based company said today in a statement. Quest said it may continue discussions with other bidders, though it “has not yet determined that any of the alternative proposals constitute a superior proposal under the merger agreement.”

Quest, a provider of business software for managing and protecting data, said on March 9 it had agreed to be acquired by Insight for $23 a share. The stock has surged 18 percent since the agreement was announced, suggesting that investors anticipate a higher bid.

“They now appear very likely to take a superior offer,” said Brian Freed, an analyst at Wunderlich Securities in Denver, who has a hold rating on the shares. “It either means someone else makes a bid superior to Insight, or Insight moves up its bid.”

The shares jumped 10 percent to $25.17 at the close in New York, the biggest increase since the Insight deal announcement. The stock has gained 35 percent this year.

JPMorgan Chase & Co. has said Quest is worth about $28, based on the software provider’s sales and cash flow, and could attract bids from International Business Machines Corp., Dell Inc. (DELL) or private-equity firms.

Higher Offers

Tracy Benelli, a spokeswoman at Quest, and Erica Harris, an Insight spokeswoman, didn’t return calls seeking comment. Doug Shelton, a spokesman for IBM, and David Frink, a spokesman for Dell, declined to comment on speculation.

Insight is likely to raise its bid, though it may be hard for a financial buyer to match an offer from a strategic purchaser, Freed said. Quest could be sold for about $26 a share, he said.

“If a new buyer is someone already in the software business who could garner operating leverage, they could always pay significantly more and yield a return,” Freed said.

Quest agreed to pay Insight $6.3 million if it finds another buyer after the end of the go-shop period, which has now expired.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net