MAI Offers $970 Million for Prime Computer
In one of the biggest bids ever made for a computer company, MAI Basic Four Inc. of Tustin launched a $970-million unsolicited offer Tuesday for Prime Computer Inc., a Massachusetts firm more than three times MAI’s size.
MAI, whose chairman and largest shareholder is New York investor Bennett S. LeBow, offered to purchase all of Prime’s stock for $20 per share in cash. The Natick, Mass., computer firm has about 48.5 million shares outstanding.
If successful, the takeover would rank as one of the computer industry’s largest, ranking behind a $4.8-billion acquisition of Sperry Corp. by Burroughs Corp. in 1986.
Prime had little comment on the MAI offer.
“We’re not saying much at this point,” said Richard Eckel, a Prime spokesman. “The company’s directors will consider the offer and act in the best interest of Prime shareholders, customers and employees.”
The takeover proposal follows an unsuccessful seven-month effort by LeBow and business associate William Weksel to sell their controlling interest in MAI. LeBow owns 37% of the company’s stock and controls an additional 17% through family trusts. Weksel owns about 6% of MAI.
In a telephone interview, LeBow said Tuesday that he and Weksel have dropped plans to sell their MAI stock.
LeBow said Prime was among dozens of firms that MAI contacted as it searched for a buyer for the LeBow-Weksel interest. Prime expressed no interest in buying the stock, he said.
According to documents filed by MAI with the Securities and Exchange Commission, Prime also rebuffed LeBow’s inquiries about a possible MAI acquisition of Prime.
In a letter sent Monday to Joe M. Henson, president and chief executive of Prime, LeBow said MAI decided to make an offer despite Prime’s lack of interest.
“With all due respect to your previously expressed desire not to pursue a business combination with MAI Basic Four, we are convinced that the case for the (merger) is so compelling that we must pursue it,” LeBow wrote. “The combination of our companies makes excellent strategic sense.”
But several analysts disagreed, saying a merger of the two computer makers didn’t seem to offer much benefit to either firm.
“The deal might make sense in the context of a New York investor trying to make money,” said Donald Bellomy, an analyst with International Data, a Framingham, Mass., market research firm. “From a computer business standpoint, it’s very hard to see where it makes much sense at all.”
Although both companies sell mid-size business computers, their products and markets are not distinct enough to really complement each other, and they are not similar enough to achieve “a critical mass,” Bellomy said.
But LeBow disagreed with the analysts. “There are synergies,” he said. “I don’t think those people are sitting down and running the numbers. We have done that.”
Two analysts suggested that LeBow’s real intent might be to pressure Prime into trying to acquire MAI to avoid being acquired itself, a strategy called the “Pac-Man” defense after the popular video game.
Bank Commitments
That suggestion “is absolutely untrue,” LeBow said. “We’re interested in merging Prime and MAI. You don’t go through all those maneuvers if you’re interested in greenmail or Pac-Man.”
Analysts said the MAI offer could put Prime into play as a takeover target, generating higher bids from other companies.
Prime’s stock closed Tuesday at $17.75 a share, up $1.875, in very heavy trading on the New York Stock Exchange. MAI, also traded on the New York exchange, closed at $11.375 a share, down $1.
MAI estimated the total cost of the Prime acquisition at approximately $1.5 billion, including substantial investment banking fees and other expenses, according to a Securities and Exchange Commission filing.
The Tustin firm said it has received a letter of commitment from the Canadian Imperial Bank of Commerce to provide up to $325 million of financing for the merger. The bank stated that it is “confident” it could syndicate to other financial institutions as much as $325 million in additional funds.
LeBow purchased MAI from its predecessor firm, Management Assistance Inc., in 1985.
