MAI Basic Four, stymied so far in its bid to acquire Prime Computer, launched a proxy fight Friday to replace Prime’s board of directors at the Massachusetts company’s shareholders meeting in May.
Analysts said the proxy fight, which was widely anticipated, is a potentially powerful and costly maneuver by the Tustin-based computer maker to acquire Prime.
MAI, which launched its $970 million offer Nov. 15, needs to secure proxies from just over 50% of Prime’s stock to wrest control of the company’s seven-member board, said MAI President William B. Patton Jr. MAI is nominating its own directors, headed by New York investor Bennett S. LeBow, to replace Prime’s current board members.
Charles Foundyller, president of Daratech, a Cambridge, Mass., market research firm, said that MAI’s proxy challenge “is a real threat that has to be taken very seriously.”
“I think that most of the players in this expect things to come to a head in May, at Prime’s annual meeting,” Foundyller said. “I know that’s been the thinking of Prime officials for a while now.”
In a proxy contest, MAI will spend several million dollars--mainly on brochures and letters explaining its position and arguing its case for acquiring Prime--to woo Prime shareholders into giving MAI the right to vote their shares at Prime’s annual meeting May 12.
Would Need 85%
Prime--which has resisted MAI’s $20 a share offer as inadequate--will counter with a campaign of its own intended to keep shareholders loyal to the company’s present directors and their policies.
While 61% of Prime’s shares had been tendered to MAI as of Feb. 15, the shareholders’ proxies are not included and MAI must seek them independently. In addition, MAI would need 85% of Prime’s shares for its tender offer to succeed.
Patton said Friday that his company still hopes to resolve the acquisition of Prime either through its tender offer or in a negotiated deal before May, but is pursuing the proxy battle in case that doesn’t happen.
The tender offer has been blocked since December, when a federal judge in Massachusetts issued a preliminary injunction sought by Prime, and MAI is fighting in court to have the injunction lifted.
Judge A. David Mazzone said MAI’s financial adviser, the investment banking firm Drexel Burnham Lambert, has failed to provide sufficient information about its role in the deal and barred MAI from accepting tendered shares until the proper disclosures are made. Drexel, a key target in the federal government’s legal assault on insider trading, tentatively agreed last month to plead guilty to six felonies and pay a record $650 million in fines and restitution to settle the biggest securities fraud probe in history.