Quest Software Inc. rose above the $23-a-share offer from Insight Venture Partners to take the technology company private, signaling investors may anticipate higher bids.
Quest Software, based in Aliso Viejo, California, advanced 24 percent to $24.07 at the close after saying in a statement that it agreed to be taken private in a deal valued at about $2 billion. The offer is 19 percent higher than Quest Software’s closing price yesterday.
The data protection provider is remaking itself by acquiring small software companies and Insight’s conservative offer price may draw higher bids, said Brian Freed, an analyst at Wunderlich Securities in Denver. The deal, the third-biggest purchase of an applications-software business in five years, has a lower premium than the average of more than 1,000 similar U.S. transactions, according to data compiled by Bloomberg.
“There’s a good probability that you would see another offer come that could result in another deal or a kiss from Insight that ends it,” said Freed, who recommends holding the stock. “Right now, it’s a pretty attractive purchase price for Insight.”
Dell Inc., the third-largest maker of personal computers, has been expanding in enterprise-software solutions and could be an appropriate buyer, Freed said. Dell last month acquired AppAssure Software Inc., which provides data-protection solutions similar to Quest, he said.
David Frink, a Dell spokesman, said the company doesn’t comment on merger and acquisition speculation.
Quest Software said it would solicit other bids for 60 days. The company could get offers close to its 52-week high of $26.93, Freed said. The agreement includes a break-up fee of $4.2 million for ending the deal during the so-called go-shop period for a higher bidder.
Quest Software’s shares had slumped 28 percent in the 12 months through yesterday.
Insight Venture is paying a premium of about 13 percent to Quest’s average 20-day stock price. That compares to an average premium of 17 percent on more than 1,000 applications-software acquisitions in the past five years, according to data compiled by Bloomberg.
Quest Software, which on Feb. 14 appointed Executive Chairman Vinny Smith as chief executive officer, said he will stay on as CEO. He succeeded Doug Garn, who had led the company since October 2008.
Morgan Stanley is Quest Sofware’s financial adviser, while Potter Anderson & Corroon LLP is providing legal counsel. They provided advice to a special committee to the company’s board, which negotiated and recommended the deal, the company said. Insight Venture’s legal adviser is Willkie Farr & Gallagher LLP.
The executive advisory board of New York-based Insight Venture, a venture-capital firm specializing in software and Internet businesses, includes former U.S. Treasury Secretary Robert Rubin and Stephen Friedman, chairman of Stone Point Capital LLC and former chairman of Goldman Sachs Group Inc.