More Than Half of Prime Shares Tendered, MAI Says

MAI Basic Four said Tuesday that it has received more than 50% of Prime Computer’s common shares and that it expects resolution this month of two court cases obstructing its $970-million hostile bid to acquire the Massachusetts minicomputer firm.

Coupled with the 4% of Prime stock that Tustin-based MAI owns outright, the tendered shares would give the company apparent control of Prime.

But William S. Patton Jr., MAI’s president, said Tuesday that it “is academic right now how much is tendered” because of the pending court cases.

Prime sued MAI in federal court in Massachusetts on Nov. 22, seeking to block MAI’s tender offer to acquire 67% or more of Prime’s stock at $20 a share.

Separately, MAI has filed suit in state Chancery Court in Delaware, where Prime is incorporated, to overturn Prime’s so-called poison pill anti-takeover measures.

MAI officials have said in the past that they would not pursue the acquisition unless Prime’s poison pill was neutralized. And MAI’s tender offer is conditioned on its being able to obtain at least 67% of Prime’s shares, a goal it has not yet met.

In the federal case, U.S. District Judge David Mazzone on Thursday refused to lift a Dec. 13 preliminary injunction that blocks MAI’s bid.

Mazzone said he wants more information from MAI and its backers about how the deal would be financed and whether the financing plan would violate federal regulations limiting the amount of borrowed money that can be used to acquire stock.

Financing for the tender offer is being arranged by Drexel Burnham Lambert, which 2 weeks ago agreed to plead guilty to federal felony charges arising from an investigation of insider trading activities. As part of the agreement, Drexel will pay a $650-million fine.

Mazzone said the agreement raised questions about Drexel’s financial condition “and its ability to obtain the financing needed” for MAI to acquire Prime.

Offer Extended to Jan. 11

On Tuesday, Patton said he expects all of Mazzone’s questions to be answered this month, perhaps as soon as the middle of next week.

Prime officials could not be reached for comment.

MAI’s tender offer recently was extended until Jan. 11.

But if the federal case or the Delaware case--or both--still have not been resolved by then, Patton said it is “probable” that MAI would extend its tender offer once again.

He said that 24.2 million of Prime’s shares--50.1% of the total outstanding--had been tendered to MAI as of Friday and that additional shares had been tendered by Tuesday. Together with the 4% of Prime’s shares that MAI owns, the Tustin computer maker potentially controls more than 54% of Prime’s stock.

Although the federal injunction makes that control a moot issue right now, Patton said he believes that the amount of stock being tendered shows that Prime shareholders have faith in MAI’s ability to finance the deal and believe that the price being offered is a good one.

But several stock analysts have said the sluggish movement of Prime’s stock price indicates that the investment community is far from convinced of the worthiness of the deal.

Prime’s shares have stayed below MAI’s $20 offer, closing Tuesday on the New York Stock Exchange at $18.50, up $1 for the day but still $1.50 lower than MAI is offering.

“It would mean something if 99.5% of the shares had been tendered,” Barry Bosak, an analyst in New York with the Robert Fleming brokerage, said. “That would probably have a bearing on the judge’s ultimate decision because it would show overwhelming shareholder approval” of MAI’s offer.

Bosak said Prime’s announcement last week that it would lay off about 1,200 workers in an effort to cut costs and increase profits appears to have driven up the stock price.

MAI’s shares, also traded on the New York exchange, closed unchanged for the day Tuesday at $8.50.