Prime Computer Asks Holders to Reject MAI’s Takeover Bid
Prime Computer Inc. asked its stockholders Wednesday to not participate in a $970-million tender offer launched by MAI Basic Four Inc. of Tustin, and Prime’s president said he is stepping down earlier than planned because of MAI’s takeover bid.
Meanwhile, Prime’s stock price dipped to $17 a share as Wall Street traders remained unconvinced that MAI will be able to pull off the proposed $20-a-share purchase of its much larger Massachusetts rival.
In a prepared release, Prime said Wednesday that its board of directors will meet “in due course” to consider the MAI offer.
Prime, with headquarters in Natick, Mass., asked its stockholders not to sell their shares to MAI until the board makes a recommendation on the offer, which the company said will come on or before Nov. 29.
Prime’s president and chief executive, Joe M. Henson, said he is resigning as a company officer in response to the MAI takeover attempt.
Henson, 55, Prime’s chief executive since 1981, announced early in October that he would be leaving the company. He had planned to remain with the firm until the end of the year in order to assist his designated successor, Anthony Craig.
The offer from Tustin-based MAI “makes it desirable to complete the transition now so Prime can be represented by the man who will have responsibility for leading (the company) in the future,” said a statement by Henson.
Henson’s resignation was effective Wednesday, but he will continue consulting work for the firm.
On Tuesday, MAI announced a $20-per-share cash offer for all of Prime’s 48.5 million shares outstanding. The MAI offer, valued at $970 million, is scheduled to expire at 12:01 a.m. on Dec 14.
In New York Stock Exchange trading Wednesday, Prime’s stock closed at $17 a share, down $1 and 15% below MAI’s bid of $20. The stock of a takeover target generally trades near the offering price if Wall Street traders believe that the bidder will succeed. A target company’s stock will sometimes trade above the bid if traders think a higher offer is likely.
The fairly wide gap between Prime’s current trading price and the MAI bid indicates that traders “think MAI won’t be able to raise the financing,” said Robert M. Johnson, a technology analyst at Rotan Mosle, a Houston investment firm.
“They also think Prime may be planning a Pac-Man defense” in which Prime would turn the tables by trying to acquire MAI, Johnson said, “and the fear of them doing that would hurt Prime’s stock.”
Johnson added that Prime may have been affected by a general weakness Wednesday in takeover-related stocks: “Every deal stock is going down big. People think these deals are not going to get financing” because of fears of higher interest rates.
MAI Chairman Bennett S. LeBow, a New York investor who controls a majority of MAI’s stock, has said he is confident the deal can be financed.
MAI said it has received letters of commitment from the Canadian Imperial Bank of Commerce and the New York investment firm Drexel Burnham Lambert proposing to provide or raise about $1.5 billion in financing for the deal.
Prime specializes in general-purpose minicomputers, which are smaller than the largest mainframe machines but larger than workstations and personal computers.
Prime is no newcomer to takeover wars, having made a hostile offer last year for Computervision Corp., a Boston-area maker of computer-aided design and manufacturing systems. Prime completed its $435-million acquisition of Computervision in February.
The Computervision acquisition made Prime the second-largest maker of CAD/CAM equipment, behind International Business Machines Corp. Prime also owns Versacad Corp., a small Huntington Beach maker of CAD/CAM equipment.
General Purpose Minicomputers
Prime’s traditional business has been general-purpose minicomputers, a range of computers between large mainframe machines and smaller workstations and personal computers.
MAI is a maker of small business computers and software for specific markets, such as the apparel, lodging and health industries.
Prime was first alerted to a possible takeover 2 months ago, when LeBow telephoned Henson and asked for a meeting to discuss MAI’s interest in Prime, according to MAI’s tender offer filing with the Securities and Exchange Commission.
LeBow, who is orchestrating the Prime takeover bid, met with Henson at Prime’s headquarters on Sept. 19. After LeBow told Henson of his interest in acquiring Prime, Henson said he would take up the matter with Prime’s directors, the SEC filing shows.
On Oct. 3, Henson announced that he is stepping down as president and chief executive.
‘Intended to Leave’
On Wednesday, Prime spokesman Richard Eckel said there was no connection between Henson’s original announcement and MAI’s acquisition overtures. He said Henson told Prime’s board in 1987 “that he intended to leave” the company.
On Oct. 4, Prime adopted “stockholder rights” and “employee protection” plans designed to make a hostile takeover prohibitively expensive to the bidder.
A day later, Henson phoned LeBow to tell him that Prime was not interested in a merger of the two companies, the SEC filing shows. On Monday, LeBow phoned Henson to tell him of MAI’s $20 offer.
LeBow told Henson that MAI might consider raising its offer “in the context of a negotiated transaction,” the filing shows.
