Stalling of MAI Bid Causes Investors to Sell Off Prime’s Stock

NEW YORK —  Investors, impatient with the legal problems that have stalled MAI Basic Four’s $1.2-billion hostile takeover offer for Prime Computer, are pulling out of Prime’s stock, traders and analysts said Friday.

Selling by arbitragers and other big investors in recent days has pushed Prime’s stock price well below the $20 a share offered by MAI, they said. Prime closed Friday at $18.375 a share, unchanged for the day, in heavy New York Stock Exchange trading.

“People are tired,” said David Wu, a computer analyst for S.G. Warburg. “This thing started in November” and is still no closer to a conclusion, he said.

MAI, a Tustin-based computer company controlled by New York investor Bennett LeBow, launched a $20-a-share tender offer for Prime, a computer company headquartered in Natick, Mass., on Nov. 15.

Wall Street was initially skeptical of LeBow’s ability to complete the deal, and Prime’s shares remained below $20. But the price climbed to a high of $21 in early February on speculation that LeBow would sweeten his offer or that Prime would find a suitor willing to top his price.

But neither a “white knight” nor a higher bid from MAI has emerged. Prime has successfully bogged LeBow down in court and Prime’s stock has since slumped.

Federal Judge A. David Mazzone in Boston has refused to lift an injunction on the tender offer, ruling that MAI has not provided enough information about its relationship with Drexel Burnham Lambert.

Drexel is arranging much of the financing for the offer, but Prime claims the Wall Street firm is really a co-bidder that control a portion of the company if MAI completed the takeover.

Mazzone has also said MAI’s offer may violate federal stock margin requirements, an issue that is being investigated by the Securities and Exchange Commission, according to congressional sources.

In addition, the Delaware Chancery Court has refused to rule on MAI’s challenge to Prime’s anti-takeover stock rights plan until the litigation in Boston is resolved.