Federal Judge Finds MAI Misled SEC in Its Bid for Prime Computer
A federal judge ruled Friday that MAI Basic Four Inc. understated the role of its investment banker during its $970-million offer for Prime Computer Inc. and said he would issue an order halting the hostile bid.
But U.S. District Judge A. David Mazzone said he would stay the order pending an appeal by MAI to the U.S. 1st Circuit Court of Appeals in Boston.
Mazzone said that Drexel Burnham Lambert Inc. had played a much larger role in the deal than MAI, which is controlled by New York investor Bennett S. LeBow, had disclosed in filings with the Securities and Exchange Commission.
The judge said Drexel’s extensive role in advising and financing the $20-a-share bid turned it from an investment banker into a bidder. Prime had alleged that Drexel controlled the bid through a series of investment partnerships that were not disclosed in federal filings.
The judge also said MAI should have been more forthright about past legal problems involving LeBow and William Weksel, who together own 43% of MAI’s shares and have been named as defendants in past shareholder lawsuits.
MAI, a computer company based in Tustin, said in a statement: “While we have not yet seen the written order, we do not believe that it will in any way impede the consummation of our offer.”
Prime closed at $16.75, down 37.5 cents, in composite New York Stock Exchange Trading on Friday.
The bid for Natick, Mass.-based Prime was made Nov. 15 and is scheduled to expire Dec. 21.
Prime, which is about four times the size of its potential buyer, late last month rejected the MAI offer. MAI owns 4.1% of Prime’s 48.5 million shares outstanding.
Prime sued MAI in federal court about one week after the takeover bid surfaced.
In a separate legal matter, the two companies squared off in Delaware Chancery Court in Wilmington, Del., on Friday over a request by MAI for a preliminary injunction against Prime’s anti-takoever defenses.
Vice Chancellor Maurie A. Hartnett heard 2 hours of oral arguments but withheld a decision on the injunction. MAI maintains that Prime enacted a “poison pill” anti-takeover plan in October to forestall a potential takeover.
Prime is second to International Business Machines Corp. in the field of computer-aided design and manufacturing systems. It also makes sophisticated computer workstations for engineers and database management systems.
Prime reported earnings of $33.4 million, or 69 cents a share, on revenue of $1.16 billion for the first three quarters of 1988. MAI reported earnings of $18.7 million, or $1.25 a share, on revenue of $302.9 million.
