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California Computer Company Launches Bid for Prime Computer

November 15, 1988

BOSTON (AP) _ A California computer company controlled by New York investor Bennett S. LeBow launched an unsolicited takeover offer on Tuesday for the much larger Prime Computer Inc. that values Prime at $970 million.

MAI Basic Four Inc., which already owns 4.1 percent of Prime’s 48.5 million outstanding shares, is offering shareholders $20 a share for the remainder of the stock.

The bid comes about 11 months after Natick-based Prime launched a hostile bid for Computervision Corp., a Massachusetts manufacturer of computer-aided design, or CAD, systems which it eventually acquired for $435 million.

Prime’s stock remained below the offering price, rising $1.87 1/2 a share to $17.75 a share in consolidated New York Stock Exchange trading. MAI Basic fell $1 a share to $11.37 1/2 a share.

″This is unusual, one computer company trying to acquire another computer company,″ said Bruce Jenkins, an analyst with Daratech, a Cambridge research firm. ″We do not see this as a technological fit or a customer fit. It has to do with benefit to stockholders.″

Jenkins also suggested that in making the offer, MAI Basic may inspire other offers for Prime. MAI Basic, based in Tustin, Calif., may be looking to be acquired by the company itself, Jenkins said.

John Dexheimer, an investment banker with Broadview Associates, also said MAI Basic’s bid appeared to be purely for financial gain.

″It’s a straight, smart financial move,″ said Dexheimer. ″The question now is, does he (LeBow) really want to go ahead with it?″

LeBow owns 43 percent of MAI Basic’s stock with an associate, William Weksel. LeBow also controls Western Union and Liggett Group Inc. and recently asked the Federal Trade Commission for clearance to buy more than 50 percent of American Brands Inc.

Both Prime and MAI Basic Four are manufacturers of midrange business computers. Prime is now a leading supplier of integrated computer-aided design and computer-aided engineering systems, having recently agreed to acquire General Electric Co.’s Calma unit, a CAD systems maker. That acquisition makes Prime second only to International Business Machines Corp. in the CAD market.

The offer is contingent upon MAI Basic getting at least 67 percent of Prime’s outstanding shares on a fully diluted basis.

MAI Basic has said that it has filed a lawsuit against Prime and its board in Delaware Chancery Court seeking to block Prime’s shareholder rights plan, a defense against unwelcome takeovers.

The company has also sued Prime in a federal court in Massachusetts seeking relief with regard to certain Massachusetts state takeover laws.

MAI Basic said it had lined up financing from Canada Imperial Bank of Commerce and Drexel Burnham Lambert Inc. Drexel Burnham and Merrill Lynch Capital Markets are the dealer-managers for the offer.

For the nine months ended Oct. 3, Prime earned $33.4 million, or 69 cents a share, on revenue of $1.16 billion.

For the nine months ended June 30, MAI Basic had net income of $18.7 million, or $1.25 a share, on revenue of $302.9 million.

LeBow informed Joe Henson, president and chief executive officer, of the bid in a telephone call Monday night, according to Joe Gavaghan, a spokesman for Prime.

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