Prime Asks Stockholders to Reject MAI’s Takeover Bid

Prime Computer asked its stockholders Wednesday not to participate in a $970-million tender offer launched by MAI Basic Four Inc. of Tustin, and Prime’s president said he is stepping down earlier than planned in the wake of MAI’s takeover bid.

Meanwhile, Prime’s stock price dipped to $17 a share as Wall Street traders remained unconvinced that MAI will be able to pull off the proposed $20-a-share purchase of its much larger Massachusetts rival.

In a prepared release, Prime said Wednesday that its board will meet “in due course” to consider the MAI offer.

Prime, headquartered in Natick, Mass., asked its stockholders not to sell their shares to MAI until the board makes a recommendation on the offer, which the company said will come on or before Nov. 29.

Prime’s president and chief executive, Joe M. Henson, said he is resigning as a company officer in response to the MAI takeover attempt.

Henson, 55, Prime’s chief executive since 1981, announced early last October that he would be leaving the company. He had planned to remain with the firm until the end of the year to assist his designated successor, Anthony Craig.

The offer from Tustin-based MAI “makes it desirable to complete the transition now so Prime can be represented by the man who will have responsibility for leading (the company) in the future,” Henson said in a statement.

Henson’s resignation was effective Wednesday, but he will continue to do consulting work for the firm.

On Tuesday, MAI announced a $20-per-share cash offer for all of Prime’s 48.5 million shares outstanding. The MAI offer, valued at $970 million, is scheduled to expire at 12:01 a.m. on Dec. 14.

In New York Stock Exchange trading Wednesday, Prime’s stock closed at $17 a share, down $1 and 15% below MAI’s bid of $20.

The stock of a takeover target generally trades near the offering price if Wall Street traders believe that the acquirer will succeed. A target company’s stock will sometimes trade above the bid if traders think a higher offer is likely.

The fairly wide gap between Prime’s current trading price and the MAI bid indicates that traders “think MAI won’t be able to raise the financing,” said Robert M. Johnson, a technology analyst at Rotan Mosle, a Houston investment firm.

“They also think Prime may be planning a Pac-Man defense” in which Prime would turn the tables by trying to acquire MAI, Johnson said, “and the fear of them doing that would hurt Prime’s stock.”

Johnson added that Prime may have been affected by a general weakness in takeover-related stocks Wednesday. “Every deal stock is going down big,” he said. “People think these deals are not going to get financing” because of fears of higher interest rates.

MAI Chairman Bennett S. LeBow, a New York investor who controls a majority of MAI’s stock, has said he is confident the deal can be financed.

MAI said it has received letters of commitment from Canadian Imperial Bank of Commerce and the New York investment firm Drexel Burnham Lambert proposing to provide or raise approximately $1.5 billion in financing for the deal.