Prime Computer Sues Suitor, Asks for Disclosure
Prime Computer, moving to fend off a hostile takeover bid by MAI Basic Four of Tustin, filed a federal court suit Tuesday seeking “full and fair disclosure” of information regarding its suitor’s $20-a-share tender offer.
The suit is a response to one MAI filed in Massachusetts that seeks to prevent Prime from employing that state’s takeover laws to block MAI’s bid. The MAI suit also seeks to have the Massachusetts law declared unconstitutional.
MAI, a computer maker controlled by New York investor Bennett S. LeBow, launched its $970-million offer for the much larger Natick, Mass., minicomputer maker on Nov. 15. Prime has asked its shareholders not to tender their shares to MAI until the company announces its recommendation.
Prime’s counterclaim alleges that MAI’s disclosure statement for its offer is “deficient.” In a prepared statement, Prime said its suit seeks “full disclosure concerning (MAI’s) relationship with Drexel Burnham Lambert Inc., the uncertain nature of (MAI’s) financing, alleged violations of the federal securities laws by certain of (MAI’s) principals in prior dealings involving other companies and other material facts.”
The Prime suit alleges that Drexel, a New York investment bank that owns 7.5% of MAI’s stock, has an “invisible hand” in the MAI bid. The suit alleges that LeBow and MAI have distributed materials to Prime shareholders that “conceals and disguises the intricate web of involvement and the effective control exercised” by Drexel in the offer.
Drexel, which has provided financing for several other LeBow acquisitions, has signed a letter of commitment to underwrite $875 million in high-yield “junk bond” financing for the deal.
Prime said Drexel’s role should be more fully disclosed because the investment bank and several of its employees are the subject of a Securities and Exchange Commission insider trading lawsuit, as well as a federal grand jury investigation, which could impair its ability to finance MAI’s buyout.
LeBow, in a statement issued through spokesman Peter Rosenthal, said the Prime claims are “without merit.”
“We are disappointed that Prime has resorted to this legal smoke screen, apparently before the Prime board has made a decision about the merits of our offer,” LeBow said.
The Prime suit also alleges that MAI has failed to disclose “material facts” about a past business dealing of LeBow and his business partner, William Weksel, owner of about 5% of MAI’s stock.
