Prime Launches Bid for Computervision

Prime Computer, a minicomputer manufacturer, Monday launched its $390-million cash tender offer for Computervision Inc., pushing an unsolicited offer in an industry where hostile takeovers are rare.

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.

Prime already has bought 1.9% of the shares of Computervision, a leader in computer assisted manufacturing and design, according to a government filing.

Prime announced its offer on Sunday. Its move to directly win over shareholders with a tender offer to pay $13.50 a share came after repeated attempts to meet with Computervision managers about a proposed takeover, Prime said.

Computervision stock jumped $4.25 to close at $13.25 in heavy trading on the New York Stock Exchange on Monday after the tender offer began.

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 in 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.”

Computervision, located in Bedford, Mass., said it would review the offer but hinted at rejection.

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.”

Henson said that despite several attempts to set up a meeting, Computervision “didn’t want to sit down and discuss it.”

Unfriendly takeover attempts are unusual in the computer industry, where a company’s personnel is often its most important asset. But a year ago, 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 takeover defense that gives its shareholders rights to buy stock if someone acquires 20% of the company, a so-called poison pill.

Computervision said it has sought a court ruling in Delaware civil court 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.

In a letter to Computervision that was made public, Henson said the combined company would have $1.5 billion in annual revenues and more than $100 million in operating income.

Prime’s earnings have been held down by high research and development costs associated with new products. But it said it has more than $500 million in cash, enough to complete the merger and provide operating capital for the combined companies.