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SCIENCE / TECHNOLOGY : In Erosion of Anti-Takeover Strategy, 3 Million Prime Shares Sold to MAI

Prime Computer won’t be able to count on its largest institutional investor to help thwart a hostile takeover bid by Tustin-based MAI Basic Four.

The state of Michigan, which held 3 million Prime shares in a pension fund that serves about 300,000 current and retired state workers, has decided to tender those shares to MAI’s $20-a-share offer for Prime.

“We think it is a good price,” Michigan State Treasurer Robert A. Bowman said Friday.

In an effort to defeat the MAI bid, Prime management has tried to convince investors and Wall Street analysts that it will take actions that will eventually boost Prime’s stock above the $20-a-share offering price. Prime, a maker of minicomputers based in Natick, Mass., has also argued that MAI’s offer, heavily financed by debt, could impair Prime’s competitiveness over the long run.

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But Prime may be losing the battle to persuade investors to be patient.

“Comparing the $20 cash with the potential $22 or $23 if Prime did things on its own, we figured we’d take the bird in hand,” Bowman said.

MAI said last week that 29.3 million Prime shares have been tendered to its offer, including the Michigan pension fund. That represents nearly 65% of Prime’s 48.3 million common shares outstanding.

MAI began its $970-million bid for Prime on Nov. 15.

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The Michigan pension fund paid $19 for each of its 3 million Prime shares--or about $57 million--when it bought the stock “several years ago,” Bowman said. At the $20 selling price, the state will receive a 5% return on its investment.


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