Quest Software goes private in $2 billion deal with Insight Venture Partners

Quest Software, a major global IT management software company, has agreed to become a privately held company. The company was listed on NASDAQ.

Affiliates of private equity and VC firm Insight Ventures Partners (an early investor in Quest Software) have agreed to pay $23 per share in cash, valuing Quest Software at no less than $2 billion.

The purchase price represents a 19% premium to yesterday’s closing price.

J.P. Morgan Chase Bank N.A., RBC Capital Markets and Barclays Capital have agreed to provide $1.195 billion in debt financing commitments to partly finance the transaction. Insight participates with a $210-million equity commitment.

Interestingly, the shares of Quest chairman and CEO Vinny Smith, who will continue to lead the company after the closing of the proposed transaction along with the rest of the existing senior management team, will be “rolled over” into the surviving privately-owned entity.

Smith’s stake represents approximately 34 percent of current shares outstanding.

One caveat: the parties have agreed to 60-day “go-shop” period during which a Special Committee will seek to fetch a better price for the business. If that happens, the company will pay a break-up fee to Insight of $4.2 million for termination of the merger agreement.

After the end of the go-shop period, the break-up fee for superior proposals is $6.3 million.

The transaction is expected to close in the third quarter of 2012. Quest says it plans to maintain its headquarters in California.

Established in 1987, the company provides IT management, virtualization and data protection solutions to 100,000 customers worldwide.