Prime May Slash Up to 1,000 Jobs in Bid to Fight MAI Takeover Bid
Prime Computer plans a major overhaul that will include as many as 1,000 layoffs as the computer maker tries to stave off a $970-million hostile takeover bid by MAI Basic Four of Tustin.
The planned corporate shake-up, which involves combining the worldwide marketing and sales organization of Prime and its Computervision subsidiary, was announced to Prime employees in general terms in an internal company memo earlier this month.
Industry analysts said the move appears to be part of Prime’s effort to fend off MAI, a computer maker controlled by New York investor Bennett S. LeBow. MAI began its $20-a-share offer for Prime on Nov. 15.
Separately on Tuesday, a Delaware Chancery Court judge ruled in favor of Prime by rejecting an attempt by MAI to invalidate Prime’s “poison pill” anti-takeover plans. Prime’s poison pills, including lucrative severance agreements for key executives known as “golden parachutes,” were adopted in an effort to make a takeover prohibitively expensive.
To defeat the LeBow bid, analysts have said that Prime, a Natick, Mass., maker of minicomputers, should move to increase the value of its stock. The planned overhaul could help the stock price by eliminating duplicative jobs and operations, analysts said.
Prime’s stock closed Tuesday at $16.25 a share, down 12.5 cents. Prime’s stock price has lagged below the $20-a-share MAI offer because investors have been skeptical about the seriousness of LeBow’s bid.
The company’s planned reorganization includes eliminating the separate sales and marketing divisions that were created when Prime acquired Computervision in a $435-million hostile takeover in February. Effective Jan. 2, Prime said it is forming a single organization that will be divided into three geographic units: North and South America; Europe, Africa and the Middle East, and the Pacific Rim.
Integrating Computervision into Prime will make it much more difficult to sell off Computervision, said Charles Foundyller, president of a Cambridge, Mass., consulting firm.
“It will be difficult to unravel Prime from Computervision, and that could put a damper on Drexel Burnham’s enthusiasm for the deal,” he said.
Analysts have speculated that LeBow and the investment banking firm Drexel Burnham Lambert, which is arranging most of the financing for the offer, would quickly move to sell Computervision to help cover the cost of the deal. LeBow has denied plans to sell Prime assets. But Prime’s lawyers have contended that documents they have obtained in legal proceedings show that MAI has plans to dispose of Prime assets.
Prime in May announced plans to eliminate 700 jobs by Dec. 31 as part of its consolidation with Computervision. A well-placed Prime source said that additional layoffs were likely to result from the Computervision acquisition regardless of the LeBow bid. But the source said the layoffs will probably occur sooner and be more severe as a result of MAI’s takeover attempt.
Estimates from sources close to the company on the size of the cutback have ranged from a couple hundred to about 1,000 jobs. Although it discussed the company’s reorganization, the internal memo did not address the possibility of layoffs.
“It’s hard to imagine that firing a couple vice presidents will save that much money,” a Prime source said. “It’s reasonable to assume there will be some layoffs and there will have to be enough to make a difference.”