Tustin’s MAI to Raise Ante : Prime Tells of ‘White Knight’
After months of searching, Prime Computer Inc. disclosed Thursday that it may finally have found a “white knight” to rescue it from a hostile takeover bid by rival MAI Basic Four Inc. of Tustin.
The Natick, Mass., minicomputer maker said it has received an acquisition offer from a bidder who asked not to be identified. In a statement, Prime said the terms of the offer prohibit it from disclosing the amount of the bid or the identity of the bidder.
MAI, meanwhile, said it intends to raise its pending $1.1-billion offer for Prime, but the company would not say by how much.
Analysts said the debut of a rival bidder and MAI’s willingness to boost its offer indicates that the seven-month takeover struggle is nearing a finale.
Disclosure Not Unexpected
“We’re getting close to the end of this one,” said Robert M. Johnson, a technology analyst with Rotan Mosle Inc. in Houston. “I don’t know how long Prime can continue to mull this secret offer from this secret bidder.”
A Prime spokesman said he did not know when the company would disclose the identity of the bidder or details of the offer.
The disclosure of a second bidder was not entirely unexpected. Prime recently said it was talking to several companies. It identified them only as two Fortune 500-size corporations and two companies specializing in the debt-financed acquisitions known as leveraged buyouts.
Trading in Prime’s stock was halted Thursday to give investors time to digest the new information. The company’s stock closed unchanged at $15.875 per share in New York Stock Exchange trading.
In a letter to Prime’s directors, MAI Chairman Bennett S. LeBow said the company intends to boost its offer after “we have completed our due diligence process and our financiers have been consulted.”
“Due diligence” was a reference to efforts by a company to ensure that proposed corporate transactions comply with legal and regulatory requirements.
‘Synergies . . . Are Substantial’
“We now, more than ever, believe that the synergies between our companies are substantial, and we therefore are the party best able to pay the highest price for Prime,” LeBow wrote.
LeBow said MAI’s decision to raise its bid was made after he met with Prime Chief Executive Anthony Craig and other Prime officials Wednesday and Thursday. The meetings followed an agreement last week under which Prime is providing confidential business data to MAI.
On Tuesday, MAI’s president and chief executive, William Patton, announced his resignation, which takes effect Sunday. The unexpected resignation prompted speculation by some analysts that Patton’s departure might indicate that MAI-Prime merger talks are finally progressing, after months of acrimony.
MAI gave no explanation for Patton’s resignation, other than to say he wishes to pursue “business and personal interests.”
LeBow’s letter said MAI wants a merger agreement that would allow Prime “the unfettered right until the closing of our tender offer to solicit third-party proposals to acquire Prime.”
Right to Cancel Deal
LeBow also said Prime would have the right to cancel the merger agreement with MAI without paying termination fees or reimbursing MAI for other costs.
Prime officials declined comment on LeBow’s letter.
MAI’s current offer would pay $19.50 per share for 75% of Prime’s fully diluted shares outstanding and $21 per share in MAI notes for the remainder. Analysts estimated the value of the MAI offer at $17 to $18 per share.
