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Quest Software accepts sweetened Insight bid

by Lou Whiteman  |  Published June 20, 2012 at 11:47 AM
Insight Venture Partners returned late Tuesday with a sweetened $2.17 billion offer for Quest Software Inc., less than a week after its original bid for the software company was trumped by an unnamed strategic buyer.

Aliso Viejo, Calif.-based Quest in a statement said it had accepted the revised $25.75 per share cash offer from Insight and new partner Vector Capital. Quest in March agreed to be taken private by Insight for $23 per share but announced June 14 that it had received an offer of $25.50 per share from an unidentified bidder believed to be Dell Inc.

As part of the deal, Quest CEO Vincent Smith will roll over at least part of his 34% stake when the transaction closes. Smith, according to reports, preferred the Insight deal because it would allow him to remain in control of the company, and limit the tax implications of a sale.

The transaction includes a contribution of $187 million in equity commitments from both Insight and Vector and about $1.2 billion of debt financing commitments from J.P. Morgan Chase Bank NA, RBC Capital Markets and Barclays.

The parties also agreed to substantial increases in the termination fees payable to the buyers should Quest eventually accept a rival offer. In that event, Quest would pay $25 million, up from $6.3 million, and reimburse up to $12 million in expenses, up from $7 million.

Launched in 1987, Quest makes software products and applications serving database management, data protection, identity and access management, among other sectors.
Insight was an early investor in Quest prior to the company's initial public offering. The New York-based firm, like San Francisco-based Vector, specializes in tech investments and buyouts.

Morgan Stanley and Potter Anderson & Corroon LLP are advising the special committee of Quest's board handling the auction, with Latham & Watkins LLP acting as legal counsel to the company and Cadwalader, Wickersham & Taft LLP serving as legal counsel to Smith.

Willkie Farr & Gallagher LLP is legal counsel to Insight, while Davis Polk & Wardwell LLP is advising Vector.
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Tags: Insight Venture Partners | Quest Software Inc. | Vector Capital | Vincent Smith

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