Dell vs. Insight: Is Battle for Quest Software Over?

Dell vs. Insight: Is Battle for Quest Software Over?

Insight Venture Partners and a surprise partner now lead the bidding war for Quest Software (NASDAQ: QSFT). But published reports Tuesday evening suggest Dell could still mount another counter-bid for Quest, which develops desktop virtualization, IT administration and managed services software.

According to a statement from Quest Software today, the company:

"has entered into an amendment to its previously announced merger agreement (the “Insight Merger Agreement” and as amended, the “Amended Agreement”) with affiliates of Insight Venture Partners (“Insight”) to provide for the addition of Vector Capital (“Vector”) as a member of the buyout group and for an increase in the merger consideration to be received by stockholders not affiliated with the buyout group from $23 per share in cash to $25.75 per share in cash. The increased purchase price represents a 33-percent premium to Quest’s closing stock price on the day prior to the announcement of the Insight Merger Agreement (March 8, 2012)."
That lengthy paragraph essentially says Insight Venture Partners, with Vector Capital's help, now leads the bidding for Quest Software.

Still, an analyst from Mizuho Securities USA Inc. told BusinessWeek that Dell could still up its bid. But other analysts doubted that theory because Dell is introducing a dividend for shareholders -- a move that ties up some Dell cash. Also, the BusinessWeek report suggested that Quest Software CEO Vincent Smith prefers the Insight Venture Partners offer.

Predicting an outcome to this software soap opera hasn't been easy. Dell allegedly dropped out of the bidding earlier this month, only to surface in media reports again a few days ago. And the latest Insight Venture Partners bid for Quest Software includes a $25 million break-up fee -- which means any potential bidders will need to sweeten the pot considerably to buy Quest Software and its related managed services software business, PacketTrap.
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