Computervision Sues to Block Prime Bid
Computervision Corp. filed suit Monday seeking to block a $390-million unsolicited takeover bid launched earlier in the day by Prime Computer Inc., a Computervision spokesman said.
The suit, filed in Delaware Chancery Court, seeks to allow Computervision to issue new shares of stock to hamper the takeover attempt, said company spokesman Peter Connell. He would not disclose how many new shares might be issued at Computervision, which is based in Bedford, Mass., but incorporated in Delaware.
The cash tender offer by Natick, Mass.-based Prime, a minicomputer manufacturer, caught some industry analysts by surprise because hostile takeover attempts are rare in the computer industry. Computer companies usually avoid such deals due to concern about computer compatibility problems and the possible loss of talented engineers. But Prime, which lined up funding for a major acquisition earlier in the year, said it had been rebuffed in past offers that it made privately to Computervision’s managers.
Computervision stock jumped $4.25 to close at $13.25 in heavy trading on the New York Stock Exchange on Monday, one day after the takeover offer was announced. Prime, which according to a government filing already owns 1.9% of Computervision’s stock, has offered to pay $13.50 a share for the company.
Analysts termed the offer low, even though it is twice the company’s book value and 26 times its earnings. The stock, which closed at $9 on Thursday, had traded as high as $20 during the year.
If the deal does go through, analysts said the two companies combined could probably do better than either one alone.
“I think it’s a pretty good deal for both of them,” said Shao Wang, an analyst at Smith Barney. “These are two companies that have both had trouble increasing their market share. Together they’ll have some shared efficiencies and they’ll be the second largest CAD/CAM company in the world after IBM.”
CAD/CAM systems are computers used in automated design and manufacturing processes for use by engineers, factories and product designers.
Prime President Joe Henson said that he respected Computervision’s “desire to remain independent.” But, he added, “We are convinced that the case for the business combination of Computervision with Prime is so compelling that we must pursue it.”
In a statement, Robert Gable, chief executive of Computervision, said, “In my only meeting with Prime on the subject of a business combination, more than two years ago, and in a couple of follow-up phone calls, the last of which was many months ago, I rejected the idea that there was a technical fit between the two companies.” Gable did not elaborate on his view of the pending offer.
Henson said that despite several attempts to set up a meeting, Computervision “didn’t want to sit down and discuss it.”
Although unfriendly takeover attempts are unusual in the computer industry, there was a major exception to the rule a year ago when one of the biggest computer makers, Burroughs Corp., launched an offer that was initially viewed as hostile to take over Sperry Corp. The deal succeeded as a friendly takeover, and the merged company became Unisys Corp.
‘Fewer Participants’
Henson rejected the depiction of Prime’s offer as unfriendly. He asked that Computervision drop a key takeover defense that gives its shareholders rights to buy stock if someone acquires 20% of the company, a so-called poison pill.
But in making its court filing Monday, Computervision was seeking a court ruling to uphold its poison-pill plan.
“We are seeing an industry in consolidation,” Henson said. “As such there are going to be fewer participants.”
He said both Prime and Computervision, which have been struggling to recover from a disastrous industrywide orders slump in 1985 and 1986, “need greater critical mass.”
Computervision had a loss of $5.8 million last year and an even bigger $80.8-million deficit the year before, but has been profitable in 1987.
However the company received a blow in November when General Motors, one of the world’s largest users of CAD/CAM equipment, announced new purchasing plans that left out Computervision.
