3Com deal collapses

IDG News Service - Bain Capital Partners and China's Huawei Technologies Co. have abandoned their bid to buy networking company 3Com Corp. because of security concerns by the U.S. government, Bain said.

The companies said last month that the proposed purchase of 3Com was on hold because of security concerns at the Committee on Foreign Investment in the United States, but they announced today that the deal was terminated because CFIUS intended to take action to prohibit the sale, Bain said in a press release.

Boston-based Bain would have controlled an 83.5% stake in 3Com, with China's Huawei getting the remainder. But some critics, including U.S. Rep. Thaddeus McCotter (R-Mich.), had raised concerns that Huawei has strong ties to the Chinese government.

The U.S. Department of Defense uses 3Com intrusion-detection products, and Chinese hackers have targeted the agency, McCotter said in an October speech.

Bain and Huawei announced in September that they intended to buy 3Com for $2.2 billion. They voluntarily filed a notice with CFIUS.

The companies have withdrawn their request for approval "because CFIUS made it clear that it intended to take action to prohibit the proposed transaction," Bain said in a press release.

A CFIUS representative didn't immediately respond to a request for comment.

Bain made several alternative proposals to 3Com that it believed "could have satisfied the concerns raised by CFIUS," Bain added. But the two sides were unable to come up with an agreement.

A 3Com spokesman wasn't immediately available to comment. As of late Wednesday, 3Com had announced that it intended to proceed with a shareholder meeting, scheduled for Friday, in which shareholders would decide whether to accept the Bain offer.