Quest Software receives higher bid

The bidding war for Quest Software Inc. continued, this time with a mystery buyer making a more than $2.3-billion offer for the company that makes software for businesses and governments.

The latest bid of $27.50 a share came from a “strategic bidder,” Quest said, and is nearly $2 higher than the June 15 offer of $25.75 from private firms Insight Venture Partners and Vector Capital.

Quest, which is based in Aliso Viejo, declined Monday to say who the new offer was from. It marked the fourth bid since Insight started the bidding at $23 a share in March.

Because the new offer came from what was described as a “strategic bidder,” it was probably from another software or computer company, said Aaron Schwartz, an equity analyst at Jefferies & Co. He said the bidder was widely rumored to be computer giant Dell Inc.

“Quest is a very good fit for Dell strategically,” said Schwartz, because of Quest’s success with its business software.

Dell declined to comment.

Analyst John DiFucci, who is managing director of equity research at JPMorgan Chase & Co., said that if the bidder wasn’t Dell, it might be another prominent firm — such as IBM Corp. or Oracle Corp. — that might be seeking to broaden its business software offerings.

Quest has “a pretty broad suite of products,” DiFucci said, “and it could bring a nice nucleus to build on for a company that wants to expand into the enterprise software space.”

It marked the second time Insight was outbid for Quest. Insight, which pulled Vector in as a partner when it made it’s second offer, has three days to meet the new bid.

Insight declined to comment Monday.

Quest, a 25-year-old firm with 3,850 employees, sells its products to commercial companies, nonprofits and government clients. Last year it posted a profit of $44 million on sales of $857 million.

Any deal to acquire Quest has to be approved by its shareholders, who already gave their blessing to the first offer from Insight. Quest said that if the new bid was submitted to shareholders and not approved, the unnamed firm would be given the right to buy shares equal to a nearly 20% stake in the company.

The unnamed bidder also could be owed a break-up fee.

The original Insight offer was supported by Quest Chief Executive Vincent Smith, who would remain with the company in his current position if Insight and Vector win the bidding battle, Schwartz said.

But Insight’s initial bid left room for others to make offers. Even the fourth bid does not exceed expectations, Schwartz said.

“I don’t think they’re overpaying,” he said.

Schwartz was skeptical of Insight’s and Vector’s ability to meet or exceed the new bid. He said “the likelihood of a competing transaction is much lower, and that the bid process is close to complete.”

Quest shares rose $1.48, or 5.6%, to $27.70.