Through an agreement with Insight Venture Partners, Aliso Viejo-based Quest Software will convert from a publicly held company to a private entity. Quest shareholders who are not associated with Insight or its affiliates will receive $23 in cash per share in the company; this buyout sets the value of the company at $2 billion. The price offered per share is 19 percent more than the company’s value at the close of market on March 8.
Quest entered into the definitive merger agreement with an affiliate of Insight Venture Partners, which is acting as the buyout group. The deal was reached after Quest’s board of directors created a special committee, advised by independent financial and legal consultants, to negotiate with the Insight affiliate and offer recommendations to the board. Based on the committee’s advice, the board voted in favor of the proposed merger; Vinny Smith, Quest’s chairman and CEO, recused himself from the vote.
“As a private company, we will have increased flexibility to drive innovation across our product lines and execute our long-term strategy,” Smith said. “We expect that this strategic partnership with Insight, with whom we have worked for many years, will ensure the company has a secure foundation and a commitment to investment in the company’s long-term growth.”
Under the terms of the agreement, Quest has a 60-day period to solicit and consider alternative proposals and superior offers, and enter into negotiations with other companies. Should Quest decide to terminate the agreement with Insight in favor of another proposal, Quest will be required to pay Insight a $4.2 million “break-up fee” during the 60-day period, or $6.3 million at any point thereafter.
“Insight has known Vinny Smith for many years and is pleased to support him and management as they seek the stability and long-term focus required for the Company to achieve its potential,” said Michael Triplett, managing director of Insight. “We believe that our track record of success working with leading infrastructure management software companies enables us to be strong partners to management while they increase value to all stakeholders in the company, including employees and customers.”
Official approval of the transaction requires a vote of the company’s majority shareholders, which will occur at a special meeting. Should Quest receive no superior offers, and subject to closing conditions, the execution of the buyout is expected in the third quarter of 2012.
The buyout transaction, when it occurs, will be financed though Insight, which is committing $210 million in equity and $1.195 billion in debt financing from J.P. Morgan Chase, RBC Capital Markets and Barclays Capital. The difference will be made up by rolling over Smith’s existing shares and restricted stock into the new private company.
“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,” Smith said.
At the conclusion of the deal, Quest will become a privately held firm, operating out of its same headquarters and led by its existing senior management team, headed by Smith.
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