MAI Cuts Bid for Prime; Offers 25% Less Cash, Adds Securities

Six months into its hostile takeover bid for Prime Computer, MAI Basic Four Inc. on Thursday lowered its $1.3-billion cash bid for the company by offering 25% less cash and adding securities.

The new package carries a total cash price of $965.7 million and comes with the disclosure of the names of four investment firms providing MAI’s financing, something the Tustin-based computer firm seems to have had difficulty securing.

On May 15, Prime’s chairman, David J. Dunn, challenged MAI in a public letter to get its financing in order for the proposed $20-a-share offer by today. If it did, he said, Prime would not invoke anti-takeover measures.

“We were asked where the financing was, and now we’re saying here it is,” said William B. Patton, MAI’s president.

Patton attributed the lower offer to Prime’s recent projections of lower revenue, plus new and costly Prime employee benefit and pension plans.

Instead of $20 cash for all shares, including instruments that can be converted to shares, MAI is offering $19.50 a share only for the 49.5 million shares outstanding. The cash paid would go as low as about $14.65 a share as more Prime options and corporate bonds are converted into stock.

Any difference between the final cash price and the offer of $19.50 a share would be made up with new MAI bonds.

Executives at Prime would not comment on the new offer until after they meet to discuss it. However, Prime spokesman Joe Gavaghan termed the bonds “of questionable value.”

The new offer expires June 14, the date of Prime’s annual meeting, where a proxy fight is expected over MAI’s proposed slate of directors.

The companies financing the bid and the amounts they are committing are: Drexel Burnham Lambert Group Inc., $550 million; Canadian Imperial Bank of Commerce, $400 million; Merrill Lynch & Co., $300 million, and Brooke Partners, $150 million. The excess cash raised would be used to refinance existing debt at both companies.