Natick minimaker Prime Computer Inc threatens to open up a can of worms in its challenge to MAI Basic Four Inc to reveal who is really behind MAI’s $970m tender offer for Prime (CI No 1,065). The Prime lawsuit against MAI alleges that the inventor of junk bond finance for takeovers and buyouts in its modern form, Drexel Burnham Lambert, exerts ultimate control over the bid via a series of partnerships that include senior Drexel staff, that it has effective power of veto over the bid, and that it concealed these facts from the Securities & Exchange Commission in its filings about the offer. Prime also alleges that one of the hidden partnerships, Cambrent Financial Group Inc, was formed by Drexel’s takeover financing specialist Michael Milliken and his brother – both subjects of a grand jury investigation and defendents in a Securities & Exchange Commission lawsuit that alleges takeover fraud. Prime is effectively claiming that Drexels not only advises on, but actually controls, hostile tender offers that stand to earn it large fees, a suspicion that has been held for some time by the US government authorities investigation Drexels. MAI insists that the allegations are totally inaccurate, saying that all decisions in the bid are being taken by the board of the Tustin, California company. But if Prime’s allegations stick, they are likely not only to scupper the MAI bid, but to make it much harder for highly leveraged takeover bids to be mounted in the future.
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