TECHNOLOGY : Prime Challenges MAI to Produce Money for Buyout

Challenging hostile suitor MAI Basic Four to put up or shut up, Prime Computer’s chairman said he will sell the company to the Tustin firm if it can come up with the money for the $1.3-billion deal within 18 days.

Analysts said the challenge marks a change in strategy for Prime, which has vigorously fought the bid by much smaller MAI for six months. Last November, MAI offered to buy the Natick, Mass., minicomputer maker for $20 a share.

“Talk is cheap, Mr. LeBow,” Prime Chairman David J. Dunn said in a spirited letter sent Monday to New York investor Bennett S. LeBow, who is MAI’s majority shareholder and chairman.

“MAI has had more than six months to obtain the necessary financing to consummate its tender offer. Can you deliver on your offer, Mr. LeBow? We do not believe that you can.”

Toni Lee, a spokeswoman for MAI, said the company is “evaluating the situation” and had no immediate comment on Prime’s challenge.

Injunction Lifted

Dunn’s letter was delivered on the same day that a federal court in Boston lifted an injunction blocking MAI’s $20-a-share offer for Prime. The takeover battle has been on hold since the injunction was imposed last December.

U.S. District Judge A. David Mazzone lifted the order after being satisfied that MAI had informed Prime shareholders of the financial condition of Drexel Burnham Lambert, MAI’s investment bank. At a previous hearing, Mazzone had ruled that Drexel’s extensive involvement in the Prime takeover made the investment bank a “co-bidder” with MAI.

In his letter, Dunn promised to remove all legal obstacles to MAI--or any other “bona fide bidder”--for 19 days. Specifically, Prime said it will not employ several anti-takeover defenses, thus allowing any bidder to purchase Prime for at least $20-a-share cash by June 2.

Prime has said it is seeking offers from third parties as an alternative to the MAI bid. And MAI has said it will launch a proxy fight at Prime’s annual meeting June 14 to gain control of Prime’s board.

“We are in discussions with a number of parties,” Prime spokesman Joe Gavaghan said. He said “a number of parties” have signed confidentiality agreements that give them access to nonpublic information about Prime in exchange for a promise not to divulge that data.

Exemption From Law

Prime also said it would exempt the purchase from a Delaware law that requires a hostile purchaser to obtain at least 85% of the outstanding stock of a target company or wait three years before making any significant changes in the business.

MAI said 31.7 million Prime shares had been tendered to MAI as of May 3. Including 1.2 million shares already owned by LeBow and affiliated parties, MAI has about 66.5% of Prime’s outstanding common stock.

Prime has repeatedly questioned MAI and Drexel’s ability to raise financing for the offer in view of Drexel’s recent legal problems. Drexel has pleaded guilty to six felony counts of mail and securities fraud and agreed to pay $650 million in fines.

In a recent financial filing made at the request of Judge Mazzone, Drexel disclosed that it lost $166.7 million in 1988. However, excluding legal and settlement costs, Drexel reported a $587-million pretax operating profit from continuing operations.

Reuters news service contributed to this story.