MAI’s Rival for Prime Has Problem
Prime Computer’s plan to escape a hostile tender offer ran into a potential snag Wednesday when two banks asked Prime’s “white knight,” J. H. Whitney & Co., to raise more financing for its $1.4-billion buyout of the Massachusetts computer maker.
Prime also postponed its annual meeting for the third time, saying it wanted to give shareholders more time to study a rival offer from MAI Basic Four, a Tustin computer maker.
Whitney, a New York venture capital firm, emerged last month as a friendly suitor for Prime, which has been resisting hostile bids by MAI for eight months.
On Wednesday, Prime’s board said the Whitney offer is “economically superior” to the most recent bid by MAI. That offer was to buy a part of Prime, its minicomputer business, for $450 million in cash and $150 million in notes.
Prime’s minicomputer unit accounts for about one-third of the company’s sales.
But Chemical Bank and First National Bank of Boston told Whitney on Tuesday night that it will have to obtain additional financing because of Prime’s deteriorating financial condition, according to a Whitney statement.
Late Wednesday, Prime said it will report a loss of $19 million for its second quarter ended July 3, contrasted with earnings of $7.2 million a year ago. Prime said if it had not had $27 million in one-time expenses, most of which it attributed to the cost of the takeover battle, it would have had operating income of $10 million.
Whitney said it has been negotiating with “a major financial institution” to obtain financing to meet the banks’ new requirement. But it said “there can be no assurances” that the additional financing can be obtained on terms satisfactory to the banks or Whitney.
In an interview with the Associated Press, Robert Coultas, a Whitney attorney, declined to discuss how much additional money Whitney needs to raise. “The arrangements that may be made aren’t quite clear yet,” Coultas said.
On the New York Stock Exchange on Wednesday, Prime stock fell $1.375 a share to close at $15.75 while MAI was down 37.5 cents, closing at $5.375.
Prime said its decision to postpone its annual meeting until Aug. 9 was unrelated to the financing difficulties facing Whitney. Rather, the decision was made after the Securities and Exchange Commission urged Prime to give shareholders more time to study MAI’s latest proposal.
Whitney is offering $21.50 a share for 79%, or about 50 million, Prime shares and would exchange notes with a face value of $22 a share for the rest.