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Quest Gets $27.50-a-Share Bid, Topping Insight’s Offer

Quest Gets $27.50-a-Share Bid, Topping Insight Buyout Offer
Quest said on March 9 it agreed to be acquired by Insight for $23 a share, and two months later said it received several other proposals that it anticipated would lead to a superior offer. Photographer: Brent Lewin/Bloomberg

Quest Software Inc., the software maker that agreed to be bought by a group led by Insight Venture Partners, said it has received a higher offer of $27.50 a share in cash, the third buyout increase announced this year.

The bid from an unidentified strategic suitor is superior to a $25.75-a-share offer Quest accepted from Insight last week, the Aliso Viejo, California-based software company said today in a statement. Dell Inc. had previously offered to acquire Quest, according to a person familiar with the matter.

Quest said on March 9 it agreed to be acquired by Insight for $23 a share, and two months later said it received several other proposals that it anticipated would lead to a superior offer. Chief Executive Officer Vincent Smith prefers a sale to Insight over Dell because it would allow him to keep running the company, said the person, who asked not to be named because the negotiations are private.

“The strategic bidder is likely Dell,” said Aaron Schwartz, an analyst for Jefferies & Co. in New York, in a telephone interview today. “It would give them a relatively decent foundation for an enterprise software business. They’ve acquired storage companies, they’ve acquired networking companies, but they have not built out a software business relative to their peers.”

Tracy Benelli, a Quest spokeswoman, and Jess Blackburn, a Dell spokesman didn’t immediately return calls for comment. Blair Flicker, general counsel at Insight Venture Partners, declined to comment.

Shares Surge

Quest’s shares surged 5.6 percent to $27.69 at 9:34 a.m. in New York. The stock had advanced 41 percent this year.

Quest’s software helps businesses administer databases and servers, as well as back up information and recover lost data. Insight, a New York-based private equity firm, specializes in software and Internet businesses.

Dell, the world’s third-largest PC maker, told analysts at a June 13 meeting it plans to use deals to boost revenue from data-center hardware, software and services by 45 percent to $27.5 billion by fiscal 2016, reducing the company’s reliance on the slow-growing desktop and notebook computer business.

The last time Dell engaged in a public takeover fight was in 2010, when it lost storage company 3Par Inc. to Hewlett-Packard Co., which bought it for $2.35 billion, after the 18-day bidding contest tripled the company’s market value.

Michael Dell, founder of the Round Rock, Texas-based company, told Bloomberg News last year that HP overpaid for 3Par, and he made the right decision in dropping out of the process.

IPO Investor

Insight, a New York-based private equity firm, first invested in Quest in 1999 and was the company’s largest institutional investor at the time of its IPO that year, according to a regulatory filing at the time. Insight co-founder Jerry Murdock also served on Quest’s board of directors.

Vector Capital, a San Francisco-based private equity firm, joined Insight in the offer for Quest announced last week.

“With the expansion of the buyout group last week, it does give them flexibility to increase their bid,” said Schwartz. “But it’s limited at this price.”

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