Judge Again Thwarts MAI’s Bid for Prime Computer Takeover

In a ruling that will buy time for Prime Computer Inc., a federal judge in Boston said Tuesday that he will continue to block MAI Basic Four Inc.’s $970-million takeover offer because of incomplete disclosures by Drexel Burnham Lambert Inc., MAI’s financial adviser.

U.S. District Judge A. David Mazzone rejected a motion by Tustin-based MAI to discontinue an injunction blocking its bid. Mazzone said Drexel’s failure to provide certain financial information was “inexcusable and inexplicable.”

In December, Mazzone blocked MAI’s hostile bid for Prime Computer, a Natick, Mass., minicomputer maker, saying MAI had failed to adequately disclose its relationship with Drexel. Mazzone had also said MAI’s proposed financing may violate Federal Reserve Board margin requirements on loans used to finance stock purchases.

Mazzone said at Tuesday’s hearing that he had been ready to grant MAI’s motion on Monday, believing that Drexel had provided all the information at its disposal.

But, Mazzone said, he then discovered that Drexel, a New York investment firm, had provided far more detailed information in Securities and Exchange Commission filings for an unrelated, failed bid for Interco Inc., a St. Louis apparel manufacturer and retailer.

He asked whether Drexel was too distracted by its negotiations with the federal government to make full disclosures to him, referring to the firm’s agreement to plead guilty to six felonies and pay $650 million in a proposed settlement for securities law violations.

William McGuiness, an attorney for MAI, said “in all likelihood, my client will do whatever is necessary to pursue its legal right.” But he did not say what steps MAI would take.

The court ruling comes at a crucial time for Prime Computer, which is trying to thwart the $20-per-share bid by MAI, a computer maker controlled by New York investor Bennett S. LeBow.

As of Jan. 30, 72.6% of Prime’s common shares had been tendered to MAI. The offer, which MAI launched nearly 3 months ago, is scheduled to expire Feb. 15.

Times staff writer David Olmos contributed to this report.