3Com Corp, an unprofitable computer networking company, said on Friday that it had agreed to be acquired by Bain Capital Partners for US$2.2 billion in cash in an arrangement that also gives Chinese company Huawei Technologies Co (華為科技) a minority stake in the firm.
The deal means the end of an era for a storied Silicon Valley company that has stumbled in recent years in the face of more nimble competitors like Cisco Systems Inc and Nortel Networks Corp.
It also provides yet another test case for Washington lawmakers wary of high-technology deals with Chinese companies that they think could compromise US security.
3Com president and chief executive Edgar Masri said that the buyout would help make 3Com more competitive.
"Going private will give us more flexibility," he said. "We will be able to focus on our long-term strategic objectives."
Mark Sue, an analyst with RBC Capital, said 3Com had "struggled with execution and inconsistency" for so long that he doubted going private would solve its problems.
"Battling a strong Cisco in the enterprise may prove increasingly difficult," Sue said in a research note on Friday.
He said Huawei appeared to have the most to gain from the deal.
Under the terms of the deal, 3Com shareholders will receive US$5.30 in cash for each share of 3Com stock, a premium of about 44 percent over 3Com's US$3.68 closing price on Thursday. 3Com shares rallied US$1.26 a share, or 34 percent, to close at US$4.94. The deal, if approved, is expected to close in the first quarter of next year.
3Com executives said the size of Huawei's stake in the company would be disclosed in a few weeks.
Late last year, 3Com spent US$822 million to buy Huawei's share of a joint venture between the companies. 3Com and Huawei had formed the venture, known as H3C, in 2003 to broaden 3Com's reach in Asian markets while giving Huawei access to US customers.
Masri said the company had considered competing offers from several other companies, but selected Bain in part because of its experience in Asia. 3Com employs 6,000 people, most of them in Asia.
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