Quest Surges on $25.50-a-Share Buyout Offer, Tops Insight

Quest Surges
Signage is displayed behind the foliage outside a Quest Software Inc. office in Ottawa, Ontario, Canada. Photographer: Brent Lewin/Bloomberg

Quest Software Inc., a maker of tools to help companies manage computer systems, rose above a new $25.50-a-share cash buyout offer from a strategic bidder that topped a previous agreement with Insight Venture Partners.

The shares increased 9.2 percent to $26.06 at the close in New York, for the biggest gain since May 9, when Quest said it got alternative buyout proposals after reaching a deal to be acquired by Insight for $23 a share in March. The stock has climbed 40 percent this year.

Aliso Viejo, California-based Quest said on March 9 it agreed to be acquired by Insight for $23 a share, and didn’t name the new bidder in a statement today. Two months later, Quest said it received several other proposals during a so-called “go-shop” period that it anticipated would lead to a superior offer.

“The likely outcome here is Quest gets sold at $25.50,” said Brian Freed, an analyst at Wunderlich Securities in Denver, in an interview today. “You might see Insight raise its bid to match, but I really don’t see a bidding war here.”

Tracy Benelli, a Quest spokeswoman, and Blair Flicker, Insight Venture Partners general counsel, didn’t immediately return calls seeking comment.

Dell Inc. was in discussions to buy Quest, though negotiations broke down, a person familiar with the matter said on June 1. David Frink, a Dell spokesman declined to comment.

Dell is the unidentified strategic bidder that offered to buy Quest by topping Insight’s proposal, Reuters reported today, citing people familiar with the matter.

‘Increased Competition’

“There’s a sense of urgency at Dell that the PC business has limited life as a valuable segment because of increased competition in that business and that it needs to diversify with companies like Quest software,” said Shebly Seyrafi, an analyst with FBN Securities in New York, in an interview today.

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 or private-equity firms. Ed Barbini, an IBM spokeman, declined to comment on Quest.

Oracle Corp. might also be interested in Quest, said Seyrafi. Carol Sato, an Oracle spokeswoman, didn’t immediately return a call for comment.

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