Prime Computer Motion Attacks MAI Financing Plan for Takeover

Prime Computer, the target of a hostile takeover bid from MAI Basic Four of Tustin, has filed a motion in U.S. District Court in Boston claiming that MAI’s proposed financing for its $970-million offer violates Federal Reserve Board margin requirements.

Prime, a Natick, Mass., minicomputer manufacturer, claimed that MAI’s $20-a-share tender offer violates Federal Reserve margin requirements because it pledges more than 50% of Prime’s stock as security for funding the takeover. MAI has proposed purchasing Prime’s outstanding shares by using $20 million in cash, $875 million in high-yield “junk bonds” to be raised by the investment firm Drexel Burnham Lambert and $650 million in bank loans.

Prime’s motion, filed Tuesday, is an effort to bolster its suit aimed at blocking MAI’s acquisition bid.

MAI, a computer manufacturing and service company, called the Prime motion “a meritless claim aimed at blocking Prime’s owners from maximizing the value of their holdings.”

In an order issued Dec. 29, U.S. District Judge A. David Mazzone in Boston said the highly leveraged MAI offer raised a “serious question” of whether it violated federal margin requirements.

Mazzone issued an injunction barring the MAI offer until the Tustin firm could provide additional details about its financing of the offer.

MAI launched its takeover offer on Nov. 15. Prime has rejected the offer, which was scheduled to expire at midnight Wednesday, as inadequate.