MAI Balks at $20-Per-Share Promise in Takeover Bid

MAI Basic Four Inc. refused Friday to sign a pledge to keep its hostile takeover bid for Prime Computer Inc. at a minimum of $20 a share, fueling Wall Street suspicions that the Tustin computer firm may lower or drop its $1-billion offer.

MAI, whose attempted acquisition of Prime has dragged on for 6 months, at one point proposed such an agreement in order to gain access to confidential Prime financial information. Such agreements are often made in takeover negotiations, though less so in hostile takeovers.

But now MAI said it doesn’t want to sign because it doesn’t like a provision that puts a floor of $20 a share on offers for Prime’s stock.

MAI would only repeat earlier statements that it is “evaluating all aspects of the offer right now.”

Prime Chairman David J. Dunn said he was surprised by the latest turn in the lengthy and convoluted takeover battle. He said the refusal “demonstrates (MAI’s) lack of commitment and potential inability to deliver $20 cash per share or better.”

A federal judge on Monday set off a round of skirmishes between the two companies when he lifted an injunction blocking the MAI takeover attempt.

The same day, Prime dared MAI to go ahead and buy it by declining to invoke its anti-takeover “poison pill” defense if MAI could scrape together $1 billion to buy the company by June 2.

Since then, MAI has not clearly stated what it intends to do. Some Wall Street traders said this week that they believe MAI--in the absence of a definitive statement on the status of its takeover attempt--may be ready to back out or cut its offer below $20 a share.

One cause of MAI’s waffling may be another curve that Prime threw at MAI earlier this week: Prime said it had lowered its internal forecasts for sales and earnings because of a slump in the computer industry and the possibility that Prime could lose some customers who are tiring of the uncertainty of the takeover battle’s outcome.

Prime stock, which had been trading just below $20 through most of the takeover battle, began to slide in midweek. It closed Friday at $15.25 a share, down 62.5 cents a share. MAI’s stock closed at $7.25 a share Friday, up 12.5 cents a share.

Meanwhile, Prime spokesman Joe Gavaghan said other companies have signed the confidentiality agreement. Those companies are now studying Prime’s financial position and are in discussions with Prime about a sale, he said.

MAI’s dawdling, Gavaghan said, “is an indication they are perhaps unable to deliver on their $20 bid.”

An industry analyst said Friday that Prime’s change in tactics this week shows that “Prime is begining to realize the answer isn’t to stall.”

Computer companies have been announcing disappointing earnings recently and the industry has “gotten weak,” said Robert Johnson, an analyst at Houston’s Rotan Mosle Inc. Prime probably realizes it should bring the battle to a head now, Johnson said, while the signs are least propitious for a successful merger of the two computer makers.

“Six months ago I thought MAI had a 70% to 80% chance” to take over Prime, Johnson said. “Now I’d say it’s a 40% to 50% shot.”