Systems software maker accepts sweetened $2.1bn cash takeover bid

Quest Software, which makes tools to help companies manage computer systems, has accepted a sweetened $2.17bn (€1.73bn) $25.75-a-share bid from Insight Venture Partners and agreed to the addition of Vector Capital to the buyout group.

Insight’s new cash offer of $25.75-a-share topped a per-share bid of $25.50 that Quest received last week. That offer came from computer maker Dell, according to a source.

The deal’s termination fee was increased to $25m from $6.3m, said California-based Quest. Quest shares are up 43% this year.

The company 220 people at its Citygate Business Park Mahon Point offices in Cork and 3,900 worldwide.

Quest said on Mar 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.

CEO Vincent Smith prefers a sale to Insight over Dell because it would allow him to keep running the company, said the source. Dell may be willing to boost its bid, said Abhey Lamba, an analyst at Mizuho Securities USA.

“Even if it were to go up to $26, Dell can make the acquisition work. We are not sure if there are other factors that are weighing on Quest management’s mind.”

Though Dell needs to add systems management software like Quest’s to keep up with rivals, the company may be limited in how much it can offer because it initiated its first dividend last week, tying up some of its cash, said analyst Shaw Wu&.

“Dell just committed to pay a dividend,” he said. “That restricts what they can do. When you make a commitment to pay a dividend, you have to pay it. Buying Quest is optional.”

Dell, the world’s third-largest PC maker, told analysts at a June 13 meeting that it planned to use deals to boost revenue from data centre hardware, software and services by 45% to $27.5bn 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 to Hewlett-Packard, which bought it for $2.35bn, after the bidding war tripled the company’s market value.

Michael Dell, founder of the company, said last year that HP overpaid for 3Par, and he made the right decision in dropping out.

Bloomberg