MAI Basic Four, frustrated in its bid to buy Prime Computer Inc. outright, offered Thursday to buy a piece of the Massachusetts computer maker for $600 million in cash and securities.
Industry analysts said the new bid indicates that Tustin-based MAI had difficulty topping a $1.4-billion offer made by J. H. Whitney & Co., a New York venture capital firm. Prime tentatively agreed last month to be acquired by Whitney.
MAI, a computer maker one-third the size of Prime, launched its hostile takeover bid last November but encountered strong resistance. Then, after Prime accepted the "white knight" bid by Whitney, MAI said it would raise its $1.2-billion bid and top the Whitney offer if it could obtain the necessary financing.
Offer Excludes CAD/CAM
"I think (MAI Chairman Bennett S.) LeBow would have loved to have all of Prime," said Robert M. Johnson, an analyst with Rotan Mosle Inc., a Houston investment firm. "But he's settling for what he can get. I think there was probably some queasiness from the banks on financing a higher bid."
MAI's new proposal calls for buying Prime's minicomputer business for $450 million in cash and $150 million in securities. Minicomputers are middle-range machines used in business, industrial and scientific applications.
The offer excludes Prime's fast-growing computer-aided design and computer-aided manufacturing, or CAD/CAM, business, as well as its computer leasing and repair units. Those businesses accounted for two-thirds of Prime's $1.6-billion in sales for 1988.
Prime Chairman David J. Dunn said Prime's board "will meet to consider this proposal after it has had a chance to evaluate it."
Analysts said MAI's proposal offers some advantages for both MAI and Whitney.
"I think it would be very good for both parties if it happened," said Barry J. Tarasoff, an analyst for the New York investment firm Wertheim Schroder.
Tarasoff said Whitney could benefit from selling the slower-growing minicomputer business to MAI to reduce the cost of the deal, while still getting Prime's faster-growing operations. "There's no question that Whitney is mostly interested in the CAD/CAM business," he said.
Analysts said MAI, a minicomputer maker, seems mainly interested in Prime's minicomputer business as a way to gain more clout in that market. Prime's CAD/CAM line doesn't fit well with MAI's business, they said.
However, some analysts said Whitney might want to retain Prime's minicomputer line to help it grow the CAD/CAM business. "The minicomputer portion is needed to finance Prime's CAD/CAM business," said Jay P. Stevens, an analyst with Dean Witter Reynolds in New York.