Quest Software (Nasdaq: QSFT) Agrees to Buyout

Chicago, IL 3/9/12 (StreetBeat) -- Quest Software (Nasdaq: QSFT), a provider of database applications and other corporate I.T. must-haves, said Friday that it had agreed to be taken private by a New York-based venture capital and private equity firm, Insight Venture Partners.

The offer, which values Quest at roughly $2 billion, will give shareholders $23 a share in cash, a 19 percent premium to the company’s closing price on Thursday.

Vincent C. Smith, the company’s chief executive, and members of Mr. Smith’s management team will continue to run Quest after it is taken private, and the company’s headquarters will remain in California, the statement said. Mr. Smith owns about 34 percent of the company’s shares.

“As a private company, we will have increased flexibility to drive innovation across our product lines and execute our long-term strategy,” Mr. Smith said in a statement. “This move to a private company also will create exciting career opportunities for our employees, while retaining our commitment to continuing to provide excellent service to our customers.”

Quest’s board voted unanimously to approve the deal, the company said. Now, a special committee composed of three directors will oversee a 60-day “go shop” period to consider outside bids. The agreement forged between Insight and Quest calls for a $4.2 million breakup fee paid to Insight in the event that the deal falls through during that period, which rises to a $6.3 million breakup fee after the end of the period.

The deal is expected to close this fall, the company said. Insight has committed $210 million in equity to the take-private deal, which will be combined with more than $1 billion in prearranged debt financing from JPMorgan Chase, RBC Capital Markets and Barclays Capital, according to the statement. Mr. Smith’s shares will be rolled over into the newly private company if the deal goes through.

RBC Capital Markets and Barclays Capital acted as financial advisers on the deal. Morgan Stanley advised the special committee of the Quest board.

The law firm Potter Anderson & Corroon also advised the special committee. Latham & Watkins served as legal counsel to Quest, and Willkie Farr & Gallagher advised Insight. Cadwalader, Wickersham & Taftserved as legal counsel to Mr. Smith.

“We are pleased to have successfully negotiated a transaction that includes an attractive upfront premium for Quest’s shareholders, an all-cash deal that would eliminate ongoing execution risk following a transaction, and that compares favorably with Quest’s standalone alternatives,” said H. John Dirks, who chaired the special committee.

Quest’s share price, which fell nearly 30 percent in the previous year, jumped more than 20 percent on news of the deal, and was trading at around $23.50 on Friday morning.

StreetBeat Disclaimer

Distributed by Viestly