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Computerworld 3Com still seeks Bain-Huawei deal
But the three companies haven't agreed to a deal that meets U.S. security concerns
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March 19, 2008 (IDG News Service) 3Com Corp. and its partners in a proposed acquisition haven't yet reached a deal that they believe would ease U.S. government concerns about national security.
The networking vendor, which makes intrusion-detection products used by the U.S. government, agreed last September to be acquired by Bain Capital LLC, a Boston-based investment company, and Huawei Technologies Co., a networking vendor owned in part by the Chinese government. The Committee on Foreign Investment in the United States (CFIUS) rejected that plan in late February.
At that point, 3Com said it would work with Bain and Huawei to come up with a deal that would pass muster.
"To date, the parties have been unable to agree upon an alternative transaction that addresses CFIUS's concerns and is acceptable to 3Com's board of directors," 3Com said in a statement today. The company remains committed to looking for ways to close the proposed $2.2 billion deal but is also confident in its own long-term prospects, President and CEO Edgar Masri said in a statement.
The disclosure came as 3Com said it would go forward with a scheduled shareholder vote on the deal Friday in order to meet its commitments under the existing merger agreement. The 3Com board still recommends that shareholders vote in favor of the merger.
Although Bain would hold 83.5% of 3Com under the deal, with Huawei controlling just 16.5%, the proposal raised concerns about foreign control of sensitive security technologies.
3Com is a relatively small player in networking and has long sought angles to compete against the dominant Cisco Systems Inc. In 2003, it formed a joint venture with Huawei to make enterprise networking gear for worldwide sale and to gain a foothold in the Chinese market. In 2006, it bought out Huawei's 49% stake in that venture.
Reprinted with permission from
IDG.netStory copyright 2008 International Data Group. All rights reserved.
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