Firm Sees $23/Sh. Offer for Quest Software (QSFT) as Just the Beginning, Could Start Bidding War
Tweet
Share
E-mailGet Alerts QSFT Hot Sheet
Price: $28.00 --0%
Rating Summary:
1 Buy, 5 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 13 | New: 15
Rating Summary:
1 Buy, 5 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 13 | New: 15
Join SI Premium – FREE
Quest Software (Nasdaq: QSFT) is trading slightly lower Monday along with the broader markets following an announcement last week it entered into an agreement to be acquired by Insight Venture Partners affiliates for about $23 per share.
Today, J.P. Morgan issued some comments on the proposed merger, saying the $23 price is "modest" relative to the basic intrinsic value of Quest. Based on their DCF model, Quest could fetch as much as $26 per share. The model assume little to no free cash flow growth. Further, the firm comments, "Additionally, 5.1x EV/LTM adjusted maintenance revenue is equivalent to $28 per share, which we view as the fair value for the maintenance revenue stream alone, assuming zero growth."
Further, the price might start a bidding war for Quest. J.P. Morgan lists potential suitors as IBM (NYSE: IBM), BMC Software (NYSE: BMC), and Dell (Nasdaq: DELL). In addition, Quest might draw some attention from Oracle (Nasdaq: ORCL) and EMC (NYSE: EMC).
J.P. Morgan also commented on the potential for financial buyers to make a bid, saying, "We believe there’s room for other financial purchasers to consider QSFT as an asset that can deliver free cash flow with a net present value materially above $23, in our opinion. QSFT has operated with future growth in mind. We believe it could reduce its expense structure meaningfully and still provide the level of development and support enterprise customers expect. In addition, we note that it is possible for a financial firm to partner with a strategic firm in making an offer for Quest, though a multi-party acquisition can be difficult to manage logistically."
Shares of Quest are down 1.3 percent Monday afternoon.
Today, J.P. Morgan issued some comments on the proposed merger, saying the $23 price is "modest" relative to the basic intrinsic value of Quest. Based on their DCF model, Quest could fetch as much as $26 per share. The model assume little to no free cash flow growth. Further, the firm comments, "Additionally, 5.1x EV/LTM adjusted maintenance revenue is equivalent to $28 per share, which we view as the fair value for the maintenance revenue stream alone, assuming zero growth."
Further, the price might start a bidding war for Quest. J.P. Morgan lists potential suitors as IBM (NYSE: IBM), BMC Software (NYSE: BMC), and Dell (Nasdaq: DELL). In addition, Quest might draw some attention from Oracle (Nasdaq: ORCL) and EMC (NYSE: EMC).
J.P. Morgan also commented on the potential for financial buyers to make a bid, saying, "We believe there’s room for other financial purchasers to consider QSFT as an asset that can deliver free cash flow with a net present value materially above $23, in our opinion. QSFT has operated with future growth in mind. We believe it could reduce its expense structure meaningfully and still provide the level of development and support enterprise customers expect. In addition, we note that it is possible for a financial firm to partner with a strategic firm in making an offer for Quest, though a multi-party acquisition can be difficult to manage logistically."
Shares of Quest are down 1.3 percent Monday afternoon.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Deutsche Bank Downgrades Tesla (TSLA) to Hold, 'Considerable risk from “going balls to the wall for autonomy”'
- Energy Transfer (ET) PT Raised to $19 at Mizuho
- CSX (CSX) PT Lowered to $38 at Jefferies
Create E-mail Alert Related Categories
Analyst Comments, Mergers and AcquisitionsRelated Entities
JPMorganSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
