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MAI Basic Lowers Its Bid For Prime Computer

June 1, 1989

BOSTON (AP) _ MAI Basic Four Inc. lowered its tender offer for Prime Computer Inc. on Thursday by 50 cents a share and said the offer would no longer be all cash, citing reductions in Prime’s projected results for 1989 and 1990.

Prime temporarily removed its takeover defenses on May 15 and challenged Tustin, Calif.-based MAI either to complete a takeover by June 2 at its original offer of $20 cash per share, or to drop its bid altogether.

But one day before that deadline, MAI Chairman Bennett S. LeBow said the offer was dropping to $19.50 cash per share for Prime’s 49.5 million outstanding shares.

MAI also said it would exchange securities with a face value of $21 for each of 16.2 million additional shares that could be issued to owners of Prime options and convertible bonds.

Since investors are likely to value the paper portion of the offer at less than the stated $21 a share, it is hard to put a total value on the new offer. The original offer was estimated to be worth about $970 million.

Prime, a Natick-based maker of minicomputers and computer-aided design equipment, said its board would meet promptly to consider MAI’s revised terms. But Prime spokesman Joseph Gavaghan said the company had ″serious reservations″ about the offer.

″After six months of public statements by MAI that it was ‘committed’ to its $20 per share cash offer for all of Prime’s shares, MAI has now lowered its cash price, changed to a partial offer and is offering MAI stock and bonds of questionable value for a significant portion of Prime’s fully diluted shares,″ Gavaghan said.

LeBow said MAI’s revised offer ″represents a full and fair price″ in light of Prime’s recent lowering of revenue projections. In a May 15 filing with the Securities and Exchange Commission, Prime said it expected its annual revenues to increase 6 percent this year and 9 percent in 1990, down from earlier projections of 10 percent this year and 12.2 percent next year.

LeBow also said the revised offer was justified by ″the fact that Prime’s directors have adopted various employee benefit and pension plans″ which MAI believes could cost up to $170 million.

Securities analysts said the lower offer was not surprising, because earnings and stock prices for many computer makers are down this year and Prime has been unable to find a buyer willing to pay more than $20 per share.

″It’s a tease,″ said Charles M. Foundyller, president of Daratech Inc., a market research firm in Cambridge. ″It’s basically just enough that if you’re a stockholder or a board member, you really want to think about it ... But it’s probably less than you could get a year and a half from now.″

MAI reaffirmed its intention to wage a proxy battle for control of Prime’s board at its June 14 annual meeting if the current directors do not agree to a takeover.

MAI also said it had firm commitments for $1.4 billion in financing to cover the tender offer, pay off debts and provide working capital. Those commitments consist of $550 million from Drexel Burnham Lambert Group Inc., $400 million from the Canadian Imperial Bank of Commerce, $300 million from Merrill Lynch & Co., and $150 million from an MAI affiliate, Brooke Partners L.P., it said.

MAI, which is about one-fourth the size of Prime, owns about 1.2 million shares of Prime stock. Since it launched its hostile bid in Nov. 15, 33.3 million shares were tendered under the $20 offer, representing nearly 70 percent of the outstanding shares and just under 50 percent of Prime’s stock on a fully diluted basis.

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